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Econ Sept 16.docx

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Department
Economics
Course
ECON101
Professor
All Professors
Semester
Fall

Description
Econ ­ September 16, 2010 Reading: Chapter 3­4 Today: Production Possibilities Frontier, the Market Economy, Demand Aplia: Assignment due Sunday Production Possibilities Frontier (in notebook): Points a, b, c, and d are efficient. Point f  is unattainable. Point e is attainable but inefficient.  Every economy is inside their PPF  (ex: because of unemployment).   Unattainable combinations implies scarcity.   Many choices (many possible points) implies the concept of choice. Opportunity Cost – the benefit given up by not using the resources in the next best  alternative way Ex: Opportunity cost of going to a lecture: What did you give up? ­sleeping in, work hours, study/homework, travel, shop, eating, drink, recreation, TV Assign Values to these things: $10, 14, 16, 8, 2, 4, 1, 18, .25 – pick highest amount ($18  for recreation) because you can’t do all of them at once Ex: Total cost of a 4 year degree at the U of A: Actual Expenditure: Tuition $6500/yr, books/supplies $2000/yr = $8500/yr by 4 years =  $34 000 Opportunity costs: suppose instead of going to the U of A, an individual could work at  $30 000/yr = $120 000 Therefore, total cost (economic view) of going to school = $154 000. Opportunity cost and gains can be shown in a PPF. (see notes) Law of Increasing Costs: in order to produce extra amounts of one good, society must  give up ever increasing amounts of the other good (this can be seen in a PPF graph) This  occurs because resources are not equally productive in all activities – some labourers are  better at one thing than the other.   Scarcity  ▯choice  ▯opport
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