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251Ch2lecture2Notes

251Ch2lecture2Notes - 1 Chapter 2 The Economic Problem...

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Unformatted text preview: 8/23/2011 1 Chapter 2: The Economic Problem Lecture 2: Production possibility frontiers 1 Ch2: The Economic Problem Lecture 2: Production possibility frontiers 2 Production Possibility Frontier • Production Possibility Frontier (PPF): Graph of maximum output that can be produced by an individual or an economy 4 Graphing production possibilities • Cleaning business example # of beds made # of bathrooms cleaned 1 2 3 4 2 4 6 8 10 12 Scott’s PPF (0,12) (4,0) Ch2: The Economic Problem Lecture 2: Production possibility frontiers 5 Characteristics of PPFs • Slope of Scott’s PPF – Slope = ∆y / ∆x = ∆beds made / ∆bathrooms cleaned = -3 • PPF Characteristics: – Negative slope – Magnitude of slope=marginal cost of good “x” Ch2: The Economic Problem Lecture 2: Production possibility frontiers 8/23/2011 2 7 More PPF graphing • Caroline’s PPF 1 2 3 2 4 6 8 10 (0,10) (3,0) Caroline’s PPF Slope of PPF= - 3 1/3 = MC of bathroom cleaned Ch2: The Economic Problem Lecture 2:...
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251Ch2lecture2Notes - 1 Chapter 2 The Economic Problem...

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