ECON 212 Lecture Notes - Lecture 3: Opportunity Cost
Document Summary
The economist as a scientist: economics. Scientific method: verify or refute their theories, dispassionate development and testing of theories about how the world works, observation, theory, more observation. Substitute for laboratory experiments: economists pay close attention to the natural experiments offered by history. The art in scientific thinking: deciding which assumptions to make: different assumptions. To study short-run or long-run effects: economic models. Allow us to see what"s truly i(cid:373)porta(cid:374)t. Simplify reality to improve our understanding of it: production possibilities frontier. Combinations of output that the economy can possibly produce. Efficient levels of production: the economy is getting all it can from the scarce resources available, points on the production possibilities frontier, trade-off: The only way to produce more of one good. Is to produce less of the other good. Inefficient levels of production: points inside production possibilities frontier. Opportunity cost of producing one good: give up producing the other good, slope of the production possibilities frontier.
