ECON-UA 1 Chapter Notes - Chapter 2: Productive Efficiency, Opportunity Cost, Human Capital
18 Mar 2014
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* the opportunity cost of producing a good is that we could have made another good instead. Critical assumption (ppf) - the ppf is concave (not a linear relationship) Slope goes from shallow -> steep alongside points on the ppf. Steeper slope gives up a higher opportunity cost. Certain resources are suited towards producing specific goods. > some workers are specifically better at producing specific goods. At point a, the opportunity cost is very low. (shallow slope) Points on the curve allocate all the available resources, whereas points below the curve do not, so they"re inefficient. Points inside the ppf are called productively inefficient. We have points inside the ppf which are inefficient because there could be people who aren"t specialized in making one good as the other good (making the goods they aren"t good at making) * a well working economy values resources in such a way that they can end up on the ppf.
