Production Possibilities Frontiers chapter 2

Production - clouds reality.There may be unintended consequences Example Minimum Wage We would love to have the minimum wage rise,but the reality

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Production Possibilities Assumptions 1)Fixed Resources Determine location of curve 2) Fixed Technology 3)Full employment 4)Producing only two goods Production Possibilities Table Production Alternatives Goods A B C D E Cars(thousands) 10 9 7 4 0 Pizza (millions) 0 1 2 3 4 1)Decisions involve trade offs 2)The cost of something is what we have to give up to get it(Opportunity cost) 3)Increasing Opportunity Cost The only way to change a Standard of living is by making the curve move. Goods and Services/population =Standard of living Economic Growth: It can move when there is more output per person.When we have unemployment we are inside the curve .The reality is we need to get closer to the curve.*We are not using our resources completely. Normative Economics value of judgements, having values sometimes
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Unformatted text preview: clouds reality.There may be unintended consequences. Example: Minimum Wage We would love to have the minimum wage rise ,but the reality is this would put a lot of people out of jobs. It would create discrimination among employers. Distinction Macroeconomics vs Microeconomics *Mercantilism: Business people 1700s. The way you make profit, they have to sell more than they buy. Need resources to produce output. Sales Receipt -Purchase resources to produce output profits. David Ricardo: “ The way we specialie is by opportunity cost.” When economy is producing at one point more of one product, there is always going to be less from the other. Trade-offs are involved in most policy decisions. Economic advisers write the Economic Report for the president....
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This note was uploaded on 11/10/2011 for the course ECO 2301 taught by Professor Green during the Fall '11 term at Sam Houston State University.

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