ECON 2 Lecture Notes - Lecture 3: Free Market, Market Structure, Takers
Document Summary
The curve is bow-shaped because some resources are relatively well suited for picking nuts while others are relatively well suited for picking coffee. Principle of increasing opportunity cost/"low-hanging-fruit principle": in expanding the production of any good, first employ those resources with the lowest opportunity cost and only afterwards turn to resources with higher opportunity cost. The greater the differences among individuals" opportunity costs, the more bow-shaped the ppc will be and the greater the potential gains from specialisation. Factors that shift the ppc outward shift. Greater resources available: investment in new factories and equipment, population growth pressure on available resources. Improvements in knowledge and technology e. g. education, specialisation. Factors that shift the ppc inward shift. Low population density and geographical isolation: nepal pressure for non-specialisation and more difficult to trade. Laws and customs that limit free trade: japan: strong support for protectionism in rice production. Specialisation less variety in work boredom from job. No specialisation low wages and long hours.
