ECON 101 Lecture Notes - Lecture 11: Productive Efficiency, Opportunity Cost

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Economic concepts within a ppf framework: scarcity: Recall that scarcity is the condition where the requirement (for goods) is greater than the available resources to satisfy those needs. The ppf in exhibit 5 graphically depicts the finiteness of resources. The frontier (itself) tells us: "this is as far as you can go at this point in time. You are limited to selecting any combination of the two products at or below the frontier. Note that scarcity means certain things are possible and some are unattainable. Point a is attainable on the ppf, just as point f is; point g is not. The cost of choice and opportunity is also shown in exhibit 5. Notice that individuals must choose the combination of the two products which they want to produce within the attainable zone. There are hundreds of different combinations, but let"s consider only two, illustrated by points a and b. Which of the two people would choose.

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