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Lecture

01.09 - Scarcity, Choice & OC.docx

3 Pages
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Department
Economics
Course Code
ECON 102
Professor
Lanny Zrill

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Scarcity, Choice & OC 01-09-2013 What are resources?  Factors of production used to produce goods and services that are available for consumption o Land – arable land, minerals, etc. o Labour – human capital o Capital – manufactured aids to production – machinery, tools, buildings  Economic problem: resources are limited, but desire for goods and services are not o Choices must be made o And where there are choices, there must exist costs (ex. trade-offs) Opportunity Cost  Every time a choice is made, you are implicitly giving up the opportunity to consume (do) something else  The opportunity cost of a choice is the value of the best forgone alternative o We will think of value as the benefit minus the cost of an alternative Production Possibilities Boundary (Frontier)  PPF illustrates concepts of scarcity, choice and OC  PPF – simple and powerful model
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