ECON1101 Chapter Notes - Chapter 1 - 12: Transaction Cost, Externality, European Cooperation In Science And Technology
23 Jul 2018
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Document Summary
Mathematical modelling: simpli ed representation of reality/case to express what is going on. Every choice one makes cause externalities - often both positive and negative. It can be measured and weighted against one another to calculate the net private or net social externality. When trading there are: no transaction cost (negotiation/transportation cost, no other barriers (import quotas, tari s) 1kg banana = 1 hr to collect. 1kg rabbit = 2 hr to catch. The amount of resources used is called productivity. Often operate in constraint environment (e. g nancial, time, etc) 16hr collecting bananas = 16kg of banana, 0kg of rabbit. 16hr collecting rabbits = 0kg of banana, 8kg of rabbit. 8hr of each = 8kg of banana, 4kg of rabbit. Step 3 : bring step 1 and 2 together to produce a production possibility curve. A straight line ppc as there is only one agent. A curved ppc as there are more than one agent.
