01:220:102 Chapter Notes - Chapter 2: Human Capital, Marginal Utility

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Erin Fairweather

Document Summary

Production possibilities frontier (ppf)- boundary between those combinations of goods and services that can be produced and those that cannot. Production efficiency- production of goods and services at the lowest possible cost. Can calculate opportunity costs since there are only two goods, and one alternative is forgone. Allocative efficiency- goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. Marginal cost- opportunity cost of producing one more unit of it. Marginal benefit- benefit received from consuming one more unit of it. Depends on people"s preferences- people"s likes and dislikes and the intensity of those feelings. Marginal benefit curve- shows the relationship between the marginal benefit from a good and the quantity consumed of that good. Measure marginal benefit from a good or service by the most that people are willing to pay for an additional unit of it.