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opportunity cost.docx

3 Pages

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ECON 101
Wokia Kumase

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Sept.16 ~What is the cost of economic growth? Consume less now, then we can gain more in the future. ~Why do we trade and are there any gains to trade? ~The relationship between PPF, MB and MC. Opportunity cost increases, MC increases If we consume more production, then the satisfaction of the production decreases, it means MB decreases.. MB means willingness When MB is larger than MC, then it means that in the society, people are into that kind of production, so we need to product more of it. The point of MB=MC means allocative efficiency. ~Economic growth is an increase of GDP How do we obtain more capital? We need to sacrifice something this year, then we can gain more the next year. (To shift the PPF curve out.) Pizza ovens can not be used to produce more pizza ovens, but can be used to produce more pizzas. Biased(Neutral) Technological Advancement ~ Gains from Trade Absolute advantage : comparing productivities. Comparative advantage: comparing opportunity costs. The example on textbook: Liz’s OC of producing 1 salad: 1 smoothie producing 1 smoothie:1 salad Joe’s OC of producing 1 salad: 1/5 smooth
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