Lec3 - output than the production of other output) Points...

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Lecture 3 Econ200 01/20/2011 Assumption: Scarcity Since all resources are limited, output is also limited. Resources – Land, Labor, and Capital Output- Goods and Services Opportunity Cost – “The forgone value of the next best alternative that is not chosen.” Production possibilities curve (ppc) The different combinations of goods and services that a society can produce, given the available resources and existing technology Characteristics of the ppc 1. Negative Slope: because there’s a tradeoff, opportunity cost. a. Slope=Rise/Run = Opportunity cost of good1/good2 2. Bowed Out Shape: The Principle of Increasing Opportunity Costs (as the production of one output expands, the opportunity cost of producing another unit increases) Caused by The Imperfect Substitutability of Inputs (resources are better suited for the production of some
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Unformatted text preview: output than the production of other output) Points on, Inside, and Outside the PPC: Points on the PPC: your resources are efficient, you are on the line of the curve. Efficient- something cant be made better off without something else being made worse off. Points inside the PPC: Inefficient, due to one of the following reasons: 1. Unemployment of Resources 2. Improper Use of Resources 3. Misallocation of Resources a. Favoritism b. Discrimination c. Government Taking a Role in Markets Points Outside the PPC: Unattainable, except in the two cases: 1. Borrowing from foreign sources (when used for unproductive purposes.) 2. An overheated Economy 3....
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Lec3 - output than the production of other output) Points...

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