ECO 1104 Lecture Notes - Opportunity Cost, Great News, North American Free Trade Agreement

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: David Gray

Document Summary

Both of these groups have a model in their minds about how the labour market functions. To be useful at all, the models have to omit a lot of detail, and thus they are generalized. Any economic model good or bad, is based on unproven assumptions, from which subsequent logical deductions are made. They are designed to simplify the model so that conjectures can be made. The production possibilities frontier (ppf) is one first economic model, Assume that the economy produces two goods, guns and butter . A metaphor for social spending versus military spending during the vietnam war. It represents all feasible combinations of production of the two goods. On figure 2. 2, the interpretation of point b: given 700 units of cars, 2000computers is all that can be produced. The frontier does no include the axes. Points inside are feasible, while points beyond the ppf are unattainable. Points inside represent a situation of under-utilised resources.