A graph showing various combinations of output that can be produced when all resources are being utilized in the

most (productive) efficient manner possible

Concepts Scarcity Choice Opportunity Cost

Scarcity
It means not having enough resources to produce for unlimited human wants

Economic life - Scarcity

Unlimited human wants Limited quantity of goods

Choice
3 Fundamental and Interdependent Economic Problems

3 Fundamental and Interdependent Economic Problems

What to produce and how much? shall goods be produced?

How For

whom shall goods be produced?

Opportunity Cost
The values of the alternatives given up when one makes a choice.

Trade-off
More of one good thing can be obtained only by giving off another thing

The Graph
Curve Linear

The Graph - Linear

Unrealistic Constant

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D
Production Possibilities Frontier

C B

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The Graph - Curve

Concave to the origin

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D
Production Possibilities Frontier

C B

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Concave to the origin

Concavity

reflects the higher marginal cost that becomes inevitable due to diminishing marginal return in the production of each good as the output of other good approaches zero Slopes downward due to scarce.

Concepts
Scarcity

unattainable combination above the boundary Choice can be seen by the need to choose among the alternative attainable points along boundary, and opportunity cost Opportunity Cost refers to the cost of using them in their best alternatives.

The Graph Point A & B

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attainable

Opportunity Cost OC = Y/ X

B
X
attainable

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The Graph Point C

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Failure to use all available resources.

Economy: C
Inefficient

Recession High Unemployment

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The Graph Point D

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Unattainable Attainable Economic Growth

Due to scarcity

D Economy: More Labor and Capital Technological Progress

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Measuring the Opportunity Cost

As we move from A to B. .
3,000

Slope = Y/ X Y = - 1800 A

Quantity of Computers Produced

2,400

X = 600 Slope = - 1800/ 600

Slope = -3 B
X

600

Opportunity cost of 1car is 3 computers

1,000

200

800

Quantity of Cars Produced

END
REPORTED BY: Acidre, Hazel G.