Two major factors that affect economic growth are 1

Info icon This preview shows pages 6–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Two major factors that affect economic growth are: 1) An increase in the quantity of resources (New discovery of resources) 2) An advance in technology: Ability to produce more output with a smaller or fixed quantity of resources. Opposite of economic growth (recession) PPF shift inward. EFFICIENCY vs. INEFFICIENCY There are different types of efficiency, in terms of production. Efficiency The condition where the maximum output is produced with given resources and technology. It implies the impossibility of gains in one area without losses in another. It implies also that the economy is producing on the PPF curve, not below or above it, the
Image of page 6

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
outer limit of the attainable region. In other words, we are getting the most (in terms of output) out of what we have (in terms of available resources and technology) 1) Goal of every society to produce on PPF 2) If a society is already producing on PPF and decides to move to second point. The assumption on the second point has to be a point on the curve. 3) If a society is producing outside of curve and decides to move, the point should be on the curve. Efficiency implies that gains are impossible in one area without losses in another. Inefficiency Producing less than the maximum output with given resources and technology. 1) Gain in your production of both goods 2) Lose in your production of both goods 3) Gain or lose in one good but stay the same in the other Point F is an inefficient point. It lies below the PPF; it is below the outer limit of the attainable region. In other words, we could do better with what we have. Inefficiency implies that gains are possible in one area without losses in another. We are not getting the most out of what we have; therefore we can do better in one area without necessarily doing worsen in another. UNEMPLOYED RESOURCES When an economy exhibits inefficiency, it is not producing the maximum output with its available resources and technology. One reason - the economy may not be using all its resources, some resources are unemployed. THE EFFICIENCY CRITERION Besides evaluating production, economists also evaluate policies, programs and institution in terms of efficiency. Here they employ the efficiency criterion, which, broadly speaking, addresses the question of whether an alternative arrangement of resources or goods exists that can make at least one person better off without making anyone else worse off. Efficiency Criterion addresses the question of whether an alternative arrangement exists that can make at least one person better off without making anyone else worse off.
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern