ECN 104 Chapter Notes - Chapter 2: Economic Model, Opportunity Cost

• School: Ryerson University
• Department: Economics
• Course: ECN 104
• Professor: Frank Trimnell

Document Summary

Assumptions: used to simplify complexity of the world. To study consumption behaviour, we assume there are only 2 countries and 2 goods unrealistic but provide valuable insight. Economic model: explanation of workings of an economic phenomenon, based on simplifying assumptions. Diagram that visualizes the organization of the economy. 2 types of decision maker are made by households and firms. 2 markets: good/service market & market for factors of production. Good/services market: firm seller; household buyer. Factors of production: firm buyer; household seller. Factors of production: the inputs that is necessary for production such as land, labour, and capital. Production possibilities frontier (ppf): a graph that shows the combinations of all goods an economy can produce. Assume that there are only two goods. Goods that the country is able to produce with available factors of production. Feasible production: not every conceivable outcome is feasible.