Intro _ Basics — Chapters 1_3.pdf

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Department
Economics
Course
ECON 102
Professor
Amit Basole
Semester
Fall

Description
1.Scarcity A.As economists we re interested in those resources which are limited... a.Land, labor, oil.. b.If we use such a resource of one purpose, we cannot also use it for another purpose c.Land used for building a computer factory cannot be used to grow wheat d.Sunlight is unlimited & air was recently unlimited 1.There is no economics of sunlight but their is now economics of the atmosphere B.Opportunity Cost a.When we choose to use resources to produce one thing 1.We must give up producing something else with those resources A.This trade-off comes with a cost B.Opportunity Cost C.The value to you of the next most desired good forgone to obtain/produce some other higher-priority good D.There is always a consequence with every decision made A.Production Possibilities a.Trucks vs Tanks 1.One factory can produce either trucks or tanks A.As you produce more and more of a product the opportunity cost increases B.Between 4-5 trucks it cost two tanks to make one truck b.The opportunity cost of producing additional units of one good increases 1.Each time we give up one truck, we get less back in tank production 2.Resources are specialized to produce one good better than another A.Good tank resources are shifted first B.Later shirts involved resources less good for tank production C.Accounts for the bowed shape of the PPC c.The PPC illustrated two essential principles: 1.Scare Resources A.There is a limits to the amount we can produce in a given time with available resources & technology a.This limitation positions the PPC B.Opportunity Costs a.We can obtain additional quantities of one of the goods only by reducing production of another good B.Efficiency & the PPC a.Efficiency 1.Maximum output of a good from the resources used in production 2.Every point on the PPC is a point of efficiency 3.Every point inside the PPC represents an inefficient use of society's resources A.When might inefficiency occur? a.The Labor Force in
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