ECON 1120 Lecture Notes - Lecture 3: Horse Length, Opportunity Cost, Diminishing Returns
27 Jun 2016
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2 input goods and final goods technologies. Have kapital (k) and labor (l) that both go into making guns and butter according to some known and given technology that can be described by production functions. G = g(k,l) and b = b(k,l) Let l = 5, so lg + lb = 5. Let k = 3, kg = 2 and kb = 1. Ppf is a frontier that shows the maximum amount of one good that can be produced given a fixed amount of the other. Short term production - k is fixed. Plot relationship between other 2 values, k is not graphed. If k goes up, then the slope of the graph will be steeper. To make ppf - take the two charts, start at the top of one and compare it to the bottom of the other. Everything on the ppf is equally efficient - a given is efficient production.
