ECON 2100 Lecture Notes - Lecture 6: Opportunity Cost
Document Summary
Since resources are scare, the amount that can be produced is limited. Economist use economic models to simplify complex decisions. The production possibilities frontier is a model that economists use to illustrate the decision of what and how much countries decide to produce. It simplifies a complex decision by making some assumptions: a society produces only two goods, resources are fully and efficiently employed, technology fixed, a single snapshot in time. Everything that it is possible to produce. Frontier - is a boundary, the edge of something, as far as we can go. Combination of two goods that can be produced. As we move up the graph we use opportunity cost. Remember opportunity cost is when you give up something for something. The absolute value of the slope is the opportunity cost of producing the good on the horizontal axis. Cost of producing the good on the vertical axis.
