ECON 1B03 Lecture Notes - Lecture 2: Smartphone, Opportunity Cost

• School: McMaster University
• Department: Economics
• Course: ECON 1B03
• Professor: Hannah Holmes

Document Summary

Topic 2: production possibilities and gains from trade. Westdale produces smartphones and trucks: efficiency is when all resources are being used. The economy is producing at maximum capacity: no idle machines or labour. A graph that shows the various combinations of output an economy can produce: given the resources and technology available. Shows the best an economy can do. If it uses all its resources efficiently: given the current technology. Point h is unattainable: don"t have enough resources, don"t have developed technology. Point k is attainable: but they are not using resources efficiently. Producing a combination of goods that society wants. Moving from point a to b: to get 500 trucks, give up 200 smartphones, 2000/500 = 4 smartphones, the opportunity cost of 1 truck is 4 smartphones. Moving from point b to c: to get 200 trucks, give up 1000 smartphones, 1000/200 = 5 smartphones, the opportunity cost of 1 truck is.