Popular in Intro Economics: Survey Course
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This 2 page Class Notes was uploaded by Katie Conner on Saturday January 23, 2016. The Class Notes belongs to Econ 201 at a university taught by Donna Bueckman in Spring 2016. Since its upload, it has received 15 views.
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Date Created: 01/23/16
Production possibilities frontier (PPF) visual model of scarcity, tradeoffs, and efficiency slope of PPF graph=opportunity cost shows combinations of two goods an economy can produce given available resources and technology sets up framework for how model will work with a static amount of resources PPF and opportunity cost moving along a PPF involves shifting resources (like labor) from one good to another getting more of one good requires sacrificing some of the other good The shape of PPF theoretically straight but in reality it is bow shaped shape depends on opportunity cost as resources are shifted if opp. cost is constant, PPF is straight PPF is bow shaped if opp. cost rises as economy produces more of a good Efficiency Productive efficiency: on the PPF line and technically efficient Allocative efficiency: where a specific society wants to land on the PPF; more or less of certain resources are more efficient depending on the society Is trade necessary trade can make everyone better off countries can specialize in producing one good or service and trading it for other goods International trade exports: goods produced domestically and sold abroad imports: goods produced abroad and sold locally Gains absolute advantage: the ability to produce a good using fewer inputs than another producer absolute advantage can lead to specialization and gains from trade comparative advantage: ability to produce a good at a lower opportunity cost than another producer
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