ECON 1B03 Lecture Notes - Lecture 4: Opportunity Cost, Comparative Advantage, Economic Equilibrium
27 Sep 2018
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Econ 1B03 Lecture 4 Review Section For Test 1
September 26, 2018
Test#1 : Chapter 1-3
Summarize from questions:
1. The differences between positive and normative statement.
Positive: Objective, can be judged by evidence.
Eg. An increase in the minimum wage will increase unemployment.
Normative: Subjective, base on personal onion, usually “should ”&”ought”
Eg. Inflation is more harmful to the economy than unemployment.
2. Components in the circular flow diagram.
In the resource market, households are sellers, they sell labor and capital & firms are
buyers.
In the good & service market, firmer are sellers, they sell final products of goods and
services & household are buyers.
3. Opportunity cost.
Opportunity cost = implicit cost + explicit cost
Implicit cost =>what you give up
Explicit => what you pay => have receipt
Eg. The opportunity cost of going to university is explicit and implicit cost, where
implicit cost includes what you gave up to go to university.
4. Factor that can shift PPF.
Land, labor and capital, all of them can shift the production possibilities frontier to the
right or left.
5. The relationship between the production possibilities frontier and unemployment rate.
If the unemployment rate falls, the economy will move closer to the production
possibilities frontier, because the labor participate rate increase, and the production
