01:960:211 Lecture Notes - Lecture 3: Opportunity Cost, European Cooperation In Science And Technology
19 May 2016
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Document Summary
Production possibilities frontier: boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced, given the available factors of production and state of technology. Ppf is useful in showing effects of scarcity and its consequences. Shows limits of production, can produce anywhere within the curve, but not outside it. Production efficiency: situation in which you cannot produce more of one good or service without producing less of something else. Inefficient production would be seen producing within the curve rather than on the curve. Tradeoff: an exchange, giving up one thing for something else. When producing on the ppf line, there is a tradeoff. Moving from within the ppf curve to the line of the curve involves no trade off (think of the graph) Magnitude of the slope of the ppf line measures opportunity cost.
