01:220:102 Lecture Notes - Lecture 2: Opportunity Cost, Demand Curve

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Published on 14 Oct 2018
ECON 102 Lecture 2 - Models and Tradeoffs
Scientific Model
- Simplified representation of a real situation that is used to better understand
real-life situations
- Steps:
1) Observe real world behavior
2) Formulating a hypothesis
3) Test hypothesis
4) Confirm or reject theory based on test results
Ceteris Paribus - An assumption that all else remains unchanged
Production Possibility Frontier
- Diagram that shows the combination of two goods that are possible for a society
to produce at full employment
- Opportunity cost = slope of PPF
- The line on a PPF shows maximum efficiency
- Anything above is unattainable; under is inefficient
- The diagram below shows Jimmy’s ability to produce food and wood -
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