ECON 1 Lecture Notes - Lecture 24: Technological Change, Opportunity Cost, Comparative Advantage

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Describe the impact of choice on opportunity. Must choose because cannot satisfy all wants. Opportunity cost: value of the best alternative given up. Opportunity cost of producing more of a particular good rises as output increases marginal cost of production increases as output increases. Cost of giving something up in order to do something else. Explain how comparative advantage, specialization, and exchange affect economic outcomes(output) Comparative: specializing in task for which you have lower opportunity cost. Better to specialize even if you have absolute advantage in both tasks. Taking advantage of individual preferences and natural abilities. Allowing each worker to develop expertise and experience at a particular task. Reducing the need to shift between different tasks. Exchange: each individual specializes, then exchanges the product for money, which in turn is exchanged for goods and services. Production possibilities frontier: identifies possible combinations of the two types of goods that can be produced when all available resources are employed efficiently.

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