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Circular Flow Model and the Production Possibilities Frontier Lecture Notes

3 Pages

Course Code
ECON 1116
Tom Pla Hovinsak

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Circular Flow Model and the Production Possibilities Frontier Lecture Notes ● economics- allocating scarce resources ○ economy- method by which we allocate resources ○ 3 questions of economics ■ what goods/services are to be produced? ■ how are the goods/services to be produced? ■ who are the goods/services produced for? ○ involves trade-offs ■ measured by opportunity costs ● factors of production (resources) ○ labor: workers ○ capital: machines, etc. ○ land ○ entrepreneurship: organizes all other factors ● 3 ways society has allocated resources ○ tradition: do what you’ve always done ○ political: leader allocates resources ○ market system ■ market- group of buyers/sellers for particular good/service ■ economists study changes in markets ● cause-and-effect relationships ● types of economics ○ positive analysis- explaining “what is”
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