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ECON 2020 Exam 2 Lecture 1

by: Brianna Notetaker

ECON 2020 Exam 2 Lecture 1 Econ 2020

Marketplace > Auburn University > Econ 2020 > ECON 2020 Exam 2 Lecture 1
Brianna Notetaker

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About this Document

These notes cover the start of production possibilities frontier.
Principles of Economics: Microeconomics
William M. Finck
Class Notes
Econ, economic, Economics, Microeconomic, Microeconomics
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This 4 page Class Notes was uploaded by Brianna Notetaker on Friday September 9, 2016. The Class Notes belongs to Econ 2020 at Auburn University taught by William M. Finck in Fall 2016. Since its upload, it has received 13 views.


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Date Created: 09/09/16
ECON 2020Exam 2 Lecture 1 9-9-16 Orange – DEFINITIONS Green – FORMULAS Chapter2 ProductionPossibilitiesFrontier ProductionPossibilitiesFrontier(PPF) – curve thatgraphsallpossible combinationsoftwo given goods thataneconomycan produce ASSUMPTIONS: 1. A single economyproducesonlytwo goods 2. The quantityofresourcesfixed 3. Technologyis fixed 4. Resourcesare identical(Appliestoexample#1only) Example#1 (ConstantOpportunityCost) A. Inefficient(unemployment) B. Efficient(full employment) C. Unattainable(givenourassumptions) NOTE: We can measurechanges in unemploymentastheproduction pointmoves  A to B: decreasein unemployment  B to A: Increasein unemployment NOTE: once fullemploymentisattained,theonlywayto increasethe productionofonegood is totake resources awayfrom the other 2 Example#1: EfficientCombinations Fish 0 1 2 3 4 5 Coconuts 45 36 27 18 9 0 Opp. Cost ofa ---- 9C 9C 9C 9C 9C Fish OPPORTUNITYCOST OFNth UNIT ofX = Quantityof Y at n-1– Quantity of Y at n Law ofincreasingopportunitycosts– as productionofgoodincreases, the opportunitycostofproducinganadditionalunitrises  Opportunitycost= numberofunitsofthe othergoodgiven up Fish 0 1 2 3 4 5 Coconuts 45 42 36 27 15 0 Opp. Cost ofa ---- 3C 6C 9C 12C 15C Fish Example#2 (IncreasingOpportunityCost)  PointC is nowattainableandefficient! 3  PointD is onlyattainablethrough economicgrowthor trade. EconomicGrowth  An outwardshiftofthePPF Causes: 1. An increasein thesupplyofresources 2. A technologicalimprovement 3. A change in regulation  Throughgrowth we can producebundleD.  Throughtradewe can consumebundleDwithouta PPF shift. 4


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