Microeconomics

Leeds, von Allmen and Schiming

Chapter 2, Production Possibilities

1. Factors of Production

   1. Land

   2. Labor

   3. Capital

      1. Physical

      2. Human

      3. Financial - Is money a productive resource?

   4. Entrepreneurship

   5. Technology

2. Production Possibilities Frontier

   1. Scarcity Principle: Trade-off between goods

   2. Productive Efficiency

      1. Productivity and the PPC

      2. Absolute versus relative efficiency

   3. Law of increasing opportunity cost - the shape of the curve and movements along it

      1. Straight line

      2. Convex

      3. Concave - Low hanging fruit principle

3. Economic Growth - Movements of the PPF

   1. Population

   2. Changes in factor endowments

   3. Technology

   4. Consumption or investment goods

4. Allocative Efficiency - Choosing a point on the curve

5. Equity - Is the point we chose fair?

6. Individual Choices and the Gains from Trade

   1. Absolute Advantage

   2. Comparative Advantage

      1. Sources of comparative advantage

         1. micro level

            1. resource differences

            2. education, training, experience

         2. macro level

            1. natural resources

            2. differences in culture or society