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    Introduction To Economics: The Economic Problem Opportunity Cost Production Possibility Frontiers

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    Jerome Quejano
    The document introduces key concepts in economics including the economic problem of unlimited wants and scarce resources, opportunity cost, and production possibility frontiers. It explains that the economic problem arises from scarcity which requires societies to make choices about what, how, and for whom to produce goods and services. Opportunity cost refers to the next best alternative sacrificed in a decision. Production possibility frontiers graphically show the different combinations of goods an economy can produce given available resources and demonstrate concepts like economic growth and opportunity cost.

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    Introduction To Economics: The Economic Problem Opportunity Cost Production Possibility Frontiers

    Uploaded by

    Jerome Quejano
    26 views8 pages
    The document introduces key concepts in economics including the economic problem of unlimited wants and scarce resources, opportunity cost, and production possibility frontiers. It explains that the economic problem arises from scarcity which requires societies to make choices about what, how, and for whom to produce goods and services. Opportunity cost refers to the next best alternative sacrificed in a decision. Production possibility frontiers graphically show the different combinations of goods an economy can produce given available resources and demonstrate concepts like economic growth and opportunity cost.

    Original Description:

    Economics 1

    Original Title

    econ1

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    © © All Rights Reserved

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    The document introduces key concepts in economics including the economic problem of unlimited wants and scarce resources, opportunity cost, and production possibility frontiers. It explains that the economic problem arises from scarcity which requires societies to make choices about what, how, and for whom to produce goods and services. Opportunity cost refers to the next best alternative sacrificed in a decision. Production possibility frontiers graphically show the different combinations of goods an economy can produce given available resources and demonstrate concepts like economic growth and opportunity cost.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    26 views8 pages

    Introduction To Economics: The Economic Problem Opportunity Cost Production Possibility Frontiers

    Uploaded by

    Jerome Quejano
    The document introduces key concepts in economics including the economic problem of unlimited wants and scarce resources, opportunity cost, and production possibility frontiers. It explains that the economic problem arises from scarcity which requires societies to make choices about what, how, and for whom to produce goods and services. Opportunity cost refers to the next best alternative sacrificed in a decision. Production possibility frontiers graphically show the different combinations of goods an economy can produce given available resources and demonstrate concepts like economic growth and opportunity cost.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 8

    Introduction to

    Economics
    The Economic Problem
    Opportunity Cost
    Production Possibility Frontiers

    The Economic Problem


    Unlimited Wants
    Scarce Resources
    Land, Labour,
    Capital
    Resource Use
    Choices
    A wind farm. Copyright: iStock.com

    The Economic Problem


    What goods and services should an
    economy produce? should the emphasis be on
    agriculture, manufacturing or services, should it
    be on sport and leisure or housing?
    How should goods and services be
    produced? labour intensive, land intensive,
    capital intensive? Efficiency?
    Who should get the goods and services
    produced? even distribution? more for the
    rich? for those who work hard?

    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

    Production Possibility Frontiers

    Show the different combinations of goods and


    services that can be produced with a given
    amount of resources
    No ideal point on the curve
    Any point inside the curve suggests resources
    are not being utilised efficiently
    Any point outside the curve not attainable with
    the current level of resources
    Useful to demonstrate economic growth and
    opportunity cost

    Production Possibility
    Frontiers IfAssume
    a country
    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
    If it devotes
    allcapital
    its Yo
    combination
    of
    expense
    of fewer
    and
    consumer
    goods.
    Thegoods
    opportunity
    resources
    to
    capital
    and
    goods
    cost
    of producing
    anitextra
    consumer
    goods
    Xo
    Xo
    consumer
    X1produce
    consumeragoods
    could
    is
    Yo Y1 capital goods.
    goods

    maximum of Xm

    Y1

    Xo

    X1 Xm Consumer Goods

    Production Possibility
    Frontiers
    Production

    Capital Goods

    Y1
    Yo

    It can only produce at


    points outside the PPF
    inside the PPF
    if it finds a way of
    e.g. point
    B
    expanding
    its
    resources
    improves
    means or
    the
    the
    productivity
    of
    country
    is not
    those resources it
    usinghas.
    all This
    its will
    already
    resources
    push
    the PPF further
    outwards.

    Xo X1

    Consumer Goods

    Positive and Normative Economics

    Health care can be


    improved with more tax
    funding
    Pollution control is
    effective through a system
    of fines
    Society ought to provide
    homes for all
    Any strategy aimed at
    reducing factory closures
    in deprived areas would be
    helpful

    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

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