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Principles of Macroeconomics


1. Production Possibilities Frontier


The prouction possibilities frontier is an graphical illustration of quantities of production of various goods that an economy can produce. Because soceity's resources are not limitless, there exist trade-offs. When an economy is fully utilizing its resources, in order to produce more of one type of good, there must be a reduction in the production of other good(s). When this happens, resources such as labor, land, and/or capital that were used in the production of one type of good are re-assigned to the production of another good.


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Introduction to the Production Possibilities Frontier

In this Pencast we introduce the concept of the production possibilities frontier, show how it is illustrated, and discuss the significance of the way it is drawn. [Play Pencast]


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Shifts to the Production Possibilities Frontier

Production possibilities can change. New technologies can make more possible. Destruction of resources can reduce production possibilities. This Pencast described how to use the production possibilities frontier model to illustrate these kind of changes. [Play Pencast]


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Computing Opportunity Cost

The production possibilities frontier illustrates trade-offs. When an economy is making the most of its resources, it cannot produce more of one good without reducing the production of another good. The quantity of reduction of the other good is called an opportunity cost. This Pencast illustrates the concept with the production possibilities graphical model, and demonstrates how opportunity cost is computed. [Play Pencast]


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