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Chapter 1: Limits, Alternatives, and Choices (Production Possibilities…

- - - - Marginal Opportunity Cost
        
        Cost of producing 1 unit of a product compared to producing 1 unit of another product
      - Total Opportunity Cost
        
        Cost of producing a product compared to another product under the limit of a budget line.
- - - - Factors, other than those being changed, do not change
    - - Many models are expressed graphically
    - - Principles are true for a group, not for an individual
- - - - Focuses on facts and cause/effect relationships
    - - Value judgments based on what the economy should be and what decisions should reach to an economic decision.
- - - - Attainable combinations are below the budget line
      - Unattainable combinations are above the budget line
    - - In order to obtain a quantity of one product, you must give up a quantity of another product
      - The constant slope represents constant opportunity cost
    - - increase in income shifts budget line to right
      - Decrease in income shifts budget line to left
    - - aka budget constraint
      - A graphical curve of combinations of two products a person can purchase wit a limited income.
      - Analysis generalizes to the full range of products
    - - Often, you must take into account trade-offs and attainable combinations to make the best combination choice
- - - - Manufactured aids for producing goods and services
        
        Factory, storage, transportation, machinery
      - Capital goods aid the production of consumer goods
    - - Decides - makes business decisions
      - Innovates - create new products, production techniques, business organization
      - Catalyzes - combines all resources
      - Risks - devotes time and resources in risk of loss over success
    - - services provided for production of goods and services
    - - All natural resources
    - - All resource categories combined to produce goods and services
- - - - The quantity and quality of the factors of production are fixed
    - - The state of technology is constant
    - - The economy employs all available resources
    - - Capital goods
        
        Products that supports the production of consumer goods
      - Consumer goods
        
        Products that satisfy wants directly
  - - - Economic resources are not entirely adaptable
      - Greater production = lower quality of resources
      - Lack of resource flexibility creates larger opportunity costs
    - - The slope tells the relationship between two changes in quantity of two goods
- - - - Advances in Technology
      - Increases in Resource Quality
      - Increases in Resource Supplies
    - - The outward movement of a PPC