ECON 101 Chapter Notes - Chapter 2: Involuntary Unemployment, Human Capital

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21 Oct 2015
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Chapter 2 Text Notes
Efficiency in production: state of an economy when it could not produce more of one thing
without producing less of another
- Involuntary unemployment, for example, is inefficient
- Corresponds to any point along the PPF
Efficiency in allocation: state of an economy when resources are being used to best satisfy
consumers
- Corresponds to just one point along the PPF
- An economy can only be efficient if it is efficient in both production and allocation
and if it delivers those goods to the right people
Economic growth: an expansion of the economy’s production possibilities
- An outward shift in PPF
- Can be shifted by a change in amount of factors of production (resources that are not
used up in production, like a worker)
oFactors of production include land, labor, physical capital, and human capital
- Can be shifted by progress in technology
oEven an advancement in one small area of the economy shifts the entire
economy’s PPF outward
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