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Introduction Part 2

Introduction Part 2. Production Possibilities Positive vs Normative Statements. Production Possibilities. The maximum amount of two products that can be produced using all available resources efficiently. Production Possibilities.

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Introduction Part 2

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  1. Introduction Part 2 Production Possibilities Positive vs Normative Statements

  2. Production Possibilities • The maximum amount of two products that can be produced using all available resources efficiently.

  3. Production Possibilities • The maximum amount of two products that can be produced using all available resources efficiently.

  4. Production-Possibilities Curve • By plotting all the points onto a graph and connecting the points we create a line called the production-possibilities curve. • The curve shows all the possible combinations of corn and spears that can be produced

  5. Production-Possibilities Curve Point G: Inefficient Point F: Unattainable Points A – E: Efficient

  6. Movement in the PPC • Technological Advance

  7. Movement in the PPC • Economic growth

  8. Production-Possibilities Curve • Opportunity Cost • To produce more spears, a certain amount of corn has to be sacrificed. • Opportunity cost of x spears = amount of corn to be “sacrificed” • The opportunity cost can be found by finding the slope of the line.

  9. Production-Possibilities Schedule

  10. Positive vs Normative Statements • Positive statements are statements that describe the world as it is. • Called descriptive analysis • Normative statements express a judgment about whether a situation is desirable or undesirable. • Called prescriptive analysis

  11. Positive or Normative? • "The moon is made of green cheese" • "The world would be a better place if the moon were made of green cheese"

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