8/6/2019 [Notes] Economics

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Discussion:

y at point D, if all resources are used, at most 300 units ofproduct X and 650 units of product Y can be produced

y if production of product X is increased, the production ofproduct Y must decrease

y opportunity cost1

of producing product X is the amount ofproduct Y that must be given up to produce an extra unit

of product X

y any point along the PPF all resources are fully employed,using the best available technology

y at point A, specializing in product Y while at point Fspecializing in product X

y PPF downward sloping, shows the trade-off, it is alsobowed out or concave because of increasing

opportunity costy points inside the PPF, not all resources are fully

employed and/or not using the best techniques and/orproducing inefficiently

y points outside the PPF are infeasible

y increase in resources and/or technological improvementsleads to an outward shift of the PPF

1 Opportunity cost is the value of the best forgone

alternative

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