Macroeconomics Seminar Unit 2

Macroeconomics Seminar Unit 2 - The Production...

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The Production Possibilities Frontier shows the tradeoffs in the production of goods. Try and assume that there are two goods x and y, that resources are fully employed and common to both goods, and that technology is fixed. To produce more y, resources (e.g. labor and capital) must therefore be moved from x to y. This means that the production of more y causes fewer xs to be produced (Bowles, 2009). An example that I can think of would be my field of work, which is the restaurant industry. If you have 9 guests and it takes 3 servers to take care of those guests then that is how many you would have on the floor. If you have 2 more guests come in and you bring 1 more server in, then you take away from what the other 3 servers are doing because there are only 2 more guests and in order to bring in another server, you need 3 more. The 4 th server that you brought in is producing less because there are less people to take care of for that server and now you are just getting in the way.
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This note was uploaded on 02/01/2012 for the course MACROECONO BU204 taught by Professor Bergan during the Spring '09 term at Kaplan University.

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Macroeconomics Seminar Unit 2 - The Production...

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