Professional Documents
Culture Documents
uk
Introduction to
Economics
The Economic Problem
Opportunity Cost
Production Possibility
Frontiers
Copyright 2006 Biz/ed
http://www.bized.co.uk
http://www.bized.co.uk
http://www.bized.co.uk
Opportunity Cost
Definition the cost expressed in terms
of the next best alternative sacrificed
Helps us view the true cost of decision
making
Implies valuing different choices
http://www.bized.co.uk
http://www.bized.co.uk
Production Possibility
Frontiers
a country
IfAssume
the country
is
If it devotes all
to capital
Ifresources
it reallocates
its
can
produce
two
at
point
A
on
the
resources
goods it (moving
could round
types
of
the
PPF
A to B) it can
PPF
Itfrom
can
produce
agoods
maximum
produce
more
consumer
with
resources
of Ym.its
produce
the
Capital Goods
Ym
Yo
goods
but only
at the
capital
goods
combination
of
expense
of fewer
If it devotes
allcapital
its Yo
and
consumer
goods.
Thegoods
opportunity
resources
to
capital
and
goods
cost
of
producing
anitextra
consumer goods
Xo
Xo consumer
X1 consumer goods
could
produce a
is
Yo
Y1
goods capital goods.
maximum of Xm
Y1
Xo
X1 Xm Consumer Goods
Copyright 2006 Biz/ed
http://www.bized.co.uk
Production Possibility
Frontiers
Production
Capital Goods
Y1
Yo
Xo X1
Consumer Goods
Copyright 2006 Biz/ed
http://www.bized.co.uk
Positive Statements:
Capable of being
verified or refuted by
resorting to fact or
further investigation
Normative
Statements:
Contains a value
judgement which
cannot be verified by
resort to investigation
or research