Economics A100 Lecture Notes - Lecture 12: Pie Chart, Opportunity Cost, Bar Chart
28 Dec 2020
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Document Summary
Simplify the world and make it easier to understand. Answers questions dealing with short run and long run effects. We can"t solve all problems, so we break them down and make assumptions to simplify them. A highly simplified representation of a more complicated reality. Built with assumptions (allows us to see what"s truly important) Visual model of the economy that shows how dollars flow through markets among households and firms. Two markets are: for goods and services and for factors of production (land, labor, and capital) (capital is physical assets) Graph showing combinations of outputs that the economy can possibly produce. Economy can produce any combo on or inside the frontier, points outside the frontier are not feasible given their resources. We measure opportunity cost in terms of the x- axis. Determine opportunity cost by taking the slope (change in y over change in x)
