ECON 1050 Chapter Notes - Chapter 2: Absolute Advantage, Marginal Cost, Technological Change

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Econ chapter 2 notes and terms the economic problem. Production possibilities and oppourtunity cost: the quantity of goods and services that we, as humans, can produce is limited due to the amount of available resources and technology we can use. The production possibilities frontier (ppf) is the boundary between those combinations of goods and services that can be produced and those that cannot. We are able to achieve production effiency if we produce goods and services at the lowest possible cost. A choice along the ppf involves a tradeoff. Tradeoffs occur in almost every real life situation we encounter; we must give something up to get something else. Increasing opportunity cost the outward bowed shape of the ppf shows increasing opportunity cost: ex the opportunity cost of a pizza increases as the quantity of pizzas produced increases. Marginal benefit and preferences are contrasts to marginal cost and production possibilities: the device that illustrates preferences is the marginal benefit curve.

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