ECN 001A Lecture Notes - Lecture 5: Opportunity Cost

• School: UC-Davis
• Department: Economics
• Course: ECN 001A
• Professor: Lombardi

Document Summary

Econ-b05 lecture 5 notes - thinking like an economist continued. Assume the economy produces 100 computers and 3000 tons of wheat. Answer: a, it represents an inefficient output level. Assume the economy produces 300 computers and 3500 tons of wheat. Answer: c, represents an infeasible output level given the current level of resources and technology. Efficient: all resources are used to its fullest potential. Points under the ppf (like below d) Not efficient: some resources underutilized (ex: workers unemployed, factories idle) Points above the ppf (like above c) Opportunity cost of an item is what must be given up to obtain that item. Moving along a ppf involves shifting resources from the production of one good to the other. Society faces trade offs by sacrificing to obtain. Slope of ppf represents the opportunity cost of one good in terms of the other. Example of the ppf and opportunity cost https://image. slidesharecdn. com/chapter02-presentation-120127193621-phpapp01/95/chapte r-02-presentation-21-728. jpg?cb=1327694936.