● Productive efficiency and fully employed
resources are illustrated by a point on the
PPF. Economic growth is illustrated by a shift
outward in the PPF.
● By specializing in the production of the good
for which they have a comparative advantage
and then trading it for other goods, people
can move beyond their PPF.
● MB = marginal benefits and MC = marginal costs.
In the exhibit, the MB curve of studying
Straight
line PPF= constant opportunity costs
Positive economic determine What is
Normative economic determines what
should be
Bowed outward PPF or concave
downward = increased opportunity cost
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the LAW of Increasing opportunity cost=
as more of a good is produced, the
opportunity costs of producing that good
increase
The law of demand states that the
higher the price of a good the lower the
quantity consumers will wish to buy.(
inverse related)
The law of supply states that the higher
the price of a good the more producers
will want to supply increases
Change in demand= Shift in Demand curve
If X is a normal good: If income Increase the
Dx increase, if Income Decrease then Dx decreases
If Y is inferior good : if Income Increase
then Dy decreases; income decrease Dy increase. If X and Y are substitute: If Px increase, then
Dy increase If Px decrease then Dy decreases
The upward-sloping supply curve is the graphical representation of the
law of supply, which states that price and quantity supplied are directly related, ceteris paribus. On a
supply curve, the price (in dollars) represents the price per unit of the good. The quantity supplied, on the
horizontal axis, is always relevant for a specific period (a week, a month, etc.).
The
supply curve is not upward sloping when there is no time to produce additional units or when additional
units cannot be produced. In those cases, the supply curve is vertical.Most supply curves are upward
sloping. The fundamental reason for this behavior involves the law of diminishing marginal
returns
Seller’s inventory curves:
Surplus of good or shortage of good