ECO 12 Lecture 2: Microeconomics Chapter 2 Notes

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Chapter 2
Model: a simplified representation of a real situation that is used to better
understand real-life situations
Production Possibilities Frontier
Line separating what is possible from what is not possible
Exclude consumption demand
Shows the combinations of two goods that can be produced given the
amounts of economic resources and the state of technology
land, labor, capital, human capital know-how
Maximum output
(efficient)
more of 1 less of the other
Shapes location of the PPF
Concave Example
H -H is Not possible
- Cost is going down
- Shape determines the cost of production
Straight line example
- cost is constant
G
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