ECO 108 Lecture 3

ECO 108 Lecture 3 - Scarcity and Choice Thursday, February...

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A measure of how limited a resource is. - Opportunity cost - true cost of a scarce resource There's no explicit price for some resources. For example, time What you do + what you're giving up Total cost = money cost + opportunity cost More of one output => less of the other EXAMPLE: firm produces two outputs with fixed supply of inputs. Directly related to opportunity cost. - Because there is only so much of everything, we must make choices. - Trade-off between consumption and capital goods Invest or spend? Economic growth = increase in production of goods and services - Scarcity Negatively sloped - Slope = opportunity cost - Illustrates the trade-off in the production of one good (or class of goods) against the other. - Production of one good up Opportunity cost of other output goes up Specialized resources Principle of increasing cost Concave to the origin - RED LINE represents the greatest efficiency possible. i.e. Production frontier Production possibilities curve
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This note was uploaded on 04/08/2008 for the course ECO 108 taught by Professor Wolman during the Spring '08 term at SUNY Stony Brook.

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ECO 108 Lecture 3 - Scarcity and Choice Thursday, February...

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