ECON 1P91 Chapter Notes - Chapter 1: Opportunity Cost
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Class 1!!!!Chapter 1!September, 8. 2011
Economic Issues and Concepts
-the study of the use of scarce or limited resources to satisfy unlimited human wants.
Resources - Scarcity and Choice
- A society’s resources are usually divided into land, labour and capital.
- Resources are known as factors of production.
- Outputs are goods (tangibles) or services (intangibles).
- Resources can only produce a fraction of the goods and services desired by people.
- Most of the time the resources are limited.
- Everyone wants a piece of the oil in Alberta and the gas in Saskatchewan because the
North has riches.
-Due to the scarcity of the resources, it implies the need for choice.
- Every choice has an associated cost, the opportunity cost.
- Opportunity cost is deﬁned as the beneﬁt given up by not using resources in the best
alternative way. It is the cost of losing something not achieved because another choice
- Refer to diagram in Chapter 1 Slide 4.
A child has only 50 cents to spend. She wishes to spend it all on two types of candy,
bubble gum at 5 cents each and lollipops at 10 cents each. The constraint is 50 cents
aka Resources. The opportunity cost of getting 1 more lollipop is the 2 bubble gums that
must be given up. Maximum production combinations are seen on the line of the
- Refer to diagram in Chapter 1 Slide 6.
The PPB is the production possibility boundary.
Four Key Economic Problems
1. What is Produced and How it’s produced? (Refer to slide)
-Resource Allocation determines the the quantities of various goods that
2. What is Consumed and By Whom?
-What determines how economies distribute total output? Why do some people
get a lot and why do some get so little?
-Will the economy consume exactly what it produces?
-Microeconomics is the study of the allocation of resources as it is affected by
the workings of the price system.
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