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Opportunity Cost, PPFs, Circular Flow
Transcript of Opportunity Cost, PPFs, Circular Flow
Everything we do has an economic cost.
We consider the costs and benefits of each of the alternatives.
the next best use of our resources
(time, money, etc.)
what we give up when we choose what we want.
Production Possibilities Frontier (PPF):
Economic Model #2
the movement of wealth (money) and the factors of production between businesses and households in the factor market and the product market.
markets where producers sell their goods & services to consumers.
we rely on others, & others rely on us to provide the goods and services we consume.
occurs when a nation’s total output of goods and services increases over time.
The curve would shift outward
Increases in Productivity:
division of labor
You trust that you will be able to make more later if you sacrifice now. You are investing in your future.
Division of Labor:
work is arranged
so individual workers
do fewer tasks
when factors of production
perform that task that
they can do relatively
We have to make decisions because of scarcity.
How do we make decisions?
THIS IS CALLED COST-BENEFIT ANALYSIS
a diagram representing various combinations of goods and/or services as economy can produce when all productive resources are fully employed.
fully employed = being used efficiently
• economic growth
• opportunity cost
the market where productive resources are bought & sold
businesses hire labor with wages
buy land with rent
borrow money with interest
(consumers use the money received by selling resources to buy goods in the product market)
The amount of money, resources, and goods and services being exchanged would increase
Additional resources being found, population growth, technology,
the amount of output produced by a given amount of inputs in a certain period of time.
There are many trade offs with each choice we make
Any time we are faced with a choice
IS THE 1 "BEST" THING YOU GIVE UP WHEN YOU MAKE A CHOICE