Production Possibilities Curve and Economic Fallacies - : foraneconomy o simpleeconomy ASSUMPTIONS o o

Production Possibilities Curve and Economic Fallacies - :...

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Production Possibilities Curve Production Possibility Curve:     Graph that shows possible output combinations  for an economy o Illustrates scarcity and production choices faced by those who live in a  simple economy ASSUMPTIONS: o Only 2 goods being produced o Economy has a fixed level of technology, factors of production and  institutional framework o All factors of production are being fully and efficiently employed Law of Increasing Opportunity Cost:   In order to produce more of one product,  society must forgo an increasing amount of another product  How to increase production capacity of an economy o Land   more natural resources o Labour   population increases naturally and working age population  increases o Human Capital 
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Unformatted text preview: training, skills, and education o Capital more machines, tools, equipment, building acquired through investment o Technology / Institutional Framework Improvements in institutions such as better banking, gov’t, infrastructure and improved tech Economic Fallacies: Fallacy of Composition: a mistaken belief that is what is good for an individual is automatically good for everyone Post Hoc Fallacy: mistaken belief that what occurs before some event is the cause of it The Fallacy of Single Causation: mistaken belief based on oversimplification one event is caused by one thing rather than a whole bunch...
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  • Spring '12
  • Vallier
  • Economics, institutional framework, mistaken belief

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