ECON 202 1st Edition Lecture 2 Outline of Last Lecture II What is Economics III Scarcity IV Defining Opportunity Cost V Defining Economic Resources VI Normative vs Positive Economics Outline of Current Lecture VII The Production Possibility Frontier Model PPF A Example Model VIII Non Linear Slopes of the PPF IX Two Ways the Curve Can Shift a Increases in Resources b Increases in Technology Current Lecture The Production Possibility Frontier Model Production Possibility Frontier PPF illustrates the trade offs facing an economy that produces only two goods It shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced Fairly basic model that simplifies the economy In the PPF we will look at two goods are available to be produced fairly unrealistic Example Production Possibility Frontier Model These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Good 1 Pencils and Good 2 Pens We strive to use all of our resources appropriately to strive for efficiency We want to have all of our resources being used A B C are efficient in production D is not efficient E is not a possible outcome in the economy What do societies prefer Do they prefer to be proficient in allocation Opportunity Cost illustrated in the PPF to produce those 40 pencils we gave up 30 pens to produce 1 pencil we give up 3 4 pens to produce 1 pen we give up 4 3 of a pencil What if slope is not linear More realistic Increasing Opportunity Costs reflect specialization A C 20 pencils give up five pens Decreasing Opportunity Costs not realistic When points go outside of the arch it is unrealistic within the line and including the line itself is a possible outcome in the economy Making Point E a Reality in an Economy Shifting Out Producing more products level of production increases Two ways it shifts 1 Increases in Resources we can gain more labor more resources more capital more knowledge more goods o More Of 2 Technology better at utilizing our current knowledge o Better At Trade off when you give something up in order to have something else Society produces trade offs Factors of Production are resources used to produce goods and services Technology is the technical means for producing goods and services