ECON 1011 Chapter Notes - Chapter 6-7: Edgeworth Box, Invisible Hand, Autarky
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ECON 1011 Full Course Notes
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Production is a complicated process to produce a fruit, need workers to tend the trees, harvest, manage, and capital. Smith can spend his day producing either oranges or apples, or both amount he can collect is shown. Production possibility frontier (ppf) line shown to produce any combination of fruits. Labor productivity intercept of the ppf - quantity of apples he can produce in a unit of time o. Unit-labor requirement amount of time needed to produce a good; reciprocal of labor productivity: (formula above) Smith"s labor constraint t - or: l represents smith"s labor endowment (number of hours smith has to work) The ppf describes the combinations of goods that can be produced with the available endowment of labor. Production set (pps) all combinations of output that are possible to produce. Efficient production only occurs when all the available resources are used completely. Smith"s opportunity cost of apples is either the slope of the ppf or reciprocal of current slope.
