ECON 101 Lecture Notes - Lecture 11: Opportunity Cost, Absolute Advantage, Comparative Advantage

• School: U of M
• Department: Economics
• Course: ECON 101
• Professor: Ronald C Caldwell

Document Summary

February 22, 2016: requires sufficient ability to produce enough to meet demand. Eventually higher cost countries/individuals may have to make up short fall: transportation costs must be low enough to make specialization worthwhile, specialization limited by extent of the market. Must be possible to exchange own production for that of another. Large enough market to consume goods being produced. More likely to occur as population grows. Larger variety of good and services become available. Niche markets can be successful: new york city can find anything . The production possibility frontier: graphically demonstrates all possible combinations of two goods that can produced with a given amount of resources and technology. Shows the maximum quantity of one good that can be produced for any given amount of production of the other good: movement along the ppf shows the trade-offs that exist in production. Diverting resources from production of one good to another. Three key concepts illustrated by ppf: efficiency.