ECO 2013 Chapter Notes - Chapter 2: W. M. Keck Observatory, Opportunity Cost, Human Capital

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Def: the expansion of production possibilities aka: society"s productive capacity. Technological change-development of new goods and of better ways of producing goods services. Capital accumulation- growth of capital resources (human capital) To make opportunity growth happen, we must use some resources to produce pizzas, The opportunity cost of more pizzas in the future is less pizzas today. If an economy devotes all resources to producing more goods and services and none to advanc capital, then the production possibilities will stay the same as they are today. Hence to expand: must devote fewer resources to production and more to accumulation. Specialization: producing only one good or a few goods. Comparative advantage: ability to perform the activity at a lower opportunity cost than anyone. Absolute advantage: someone who is more productive than others at something. Decentralized coordination works best: need 4 complementary social institutions. Economic unit that hires factors of production and organizes them to produce and sell goods an services.

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