Unit 1 Notes (1/8/15)

Trade-offs: Alternatives we give up when we choose 1 course of action over another. (Do this every day)

Opportunity Cost: The most desirable alternative given up by making a decision. 

Production Possibility Graph: Shows alternative ways to use resources. 

Graph Ex.

PPC- Production Possibility Curve.

PPF- Production Possibility Frontier.






Point A- Efficient but produce more machines.
Point B- Efficient.
Point C- Efficient but producing more food.
Point D- Underutilization; attainable but inefficient 
How? - Decrease in population, Recession  War/Feminine, Underemployment/Unemployment (INSIDE CURVE) 
Point E- Unattainable.
How?- Economic growth, Technology, New Resources. 

Productive Efficiency: Producing a lowest cost and allocation resources efficiently and fill employment of resources. (any point of curve) 

Allocative Efficiency: Looking where to produce on the curve. (where to produce on the curve)


(Double lines can happen)









Added Notes to Production Possibility Graphs:

1. 2 goods are produced.
2. Full employment. (unemployment have to be 4-5%)
3. Fixed Resource (Land, labor, capital)
4. Fixed state of technology.
5. No international trade.