Econ 104 1st Edition Lecture 3 Outline of Last Lecture I Three Key Economic Ideas II Why economics III The Index of Economic Freedom IV Types of Economics Models and Analysis Outline of Current Lecture II Production Possibility Frontier PPF III Opportunity Cost IV Assumptions of PPF V Economic Growth Current Lecture I II III IV Production Possibility Frontier PPF a Shows the max attainable combinations of two products that may be produced i There must be Ceteris Paribus 1 Meaning a latin phrase that means while certain variables changes all other things constant a In PPF resources and technology are untouched b Points on the PPF graph i On the PPF line efficient ii Inside the PPF line inefficient iii Outside the PPF line unattainable Opportunity Cost the highest valued alternative that must be given up to engage in an activity a What is the opportunity cost of producing more consumer goods i You might have to produce less military goods b Increasing Opportunity Cost As an economy moves down along PPF it can experience increasing marginal opportunity costs i This happens because the more resources already devoted to an activity the smaller the payoff to devoting additional resources to that activity Assumptions of PPF a Resources are fixed b Full employment of resources c Technology and productions techniques do not change Economic Growth 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 V a PPF shifts outwards b Economic growth occurs when there is an increase in the i Resource base 1 EX natural gas oil increase in capital ii Technology improvements 1 Fracking smart cars computers c The result of economic growth is that a country s standard of living increases in terms of the number of goods and services available The two most important sources of economic growth a Increase of capital stock b Technology advance c Both can leader to an increase in worker productivity
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