Business- Economics Trade and the PPC
Business- Economics Trade and the PPC 21027
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This 3 page Class Notes was uploaded by Katie Thedford on Sunday September 25, 2016. The Class Notes belongs to 21027 at Fort Lewis College taught by Kaori Takano in Fall 2016. Since its upload, it has received 5 views. For similar materials see Business in BA 110-5H at Fort Lewis College.
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Date Created: 09/25/16
Business – Economics Trade and PPC Voluntary exchanges are value- increasing Production Possibilities Curve/ Frontier- o The model of the amount of two different goods that can be obtained by shifting resources from the production of one to the production of the other o Can be constant (straight)or increasing (curved) depending on the similarities of the two products and whether or not the resources can be shared between the two Full employment: When production is at its maximum, it will be producing on the actual curve found on a production possibilities graph. This is found on the PPC1 Line either A, B, or C Unemployment: Contrary to full employment, unemployment means that an economy is not using all of the available resources and, therefore, production falls inside the production possibilities curve This is found on point D Production on point E is impossible unless there is an improvement of technology or an introduction or new resources allowing for a PPC2 curve opportunity cost—the value of what is given up Comparative Advantage- Ability to produce a good at the lowest opportunity cost 2 Absolute Advantage-Ability to make the most products New Zealand Scotland 30 milk=1 fish 8 milk=1fish 20 fish=1 milk 10 fish=1 milk Absolute Advantage: New Zealand They can make the most of both products Comparative advantage: milk:New Zealand Fish: Scotland David Riccardo- Law of Comparative advantage 1.When two people trade voluntarily they are both better of 2.Specialization creates more production and trade 3
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