ECO 2023 Lecture Notes - Lecture 3: Opportunity Cost
11 Jan 2018
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Document Summary
Methods of organizing an economy: tradition. This years answers are the same as last years answers. Government planners determine the answers and then create plans for producers. Private, self-interested decisions versus public interest, social decisions. Markets determine prices: property right: socially determined legal right that governs the sale and usage of property. Channel self interest decisions into social interest decisions. Production possibilities frontier (ppf: helps illustrate the what? and how? questions. Limits to production: points on the line are production e cient, points inside are production ine cient, ppf = maximum combinations. Opportunity cost: opportunity cost of an action is the next best alternative cost.
