01/10/14 Ch. 2 PPG ctd, Supply and Demand

• Law of increasing opportunity cost
• When resources are shifted from making one good or service to another, the cost of producing the second item increases. 
• This occurs because not all resources are equally suited for the production of all goods and services. 
• 4 Key assumptions of the
1. Only 2 products can be produced.
2. Full employment of resources. 
3. Fixed resources.
4. Fixed technology.

• Point A- inside of the curve meaning it is attainable but inefficient.
• Point B & C- on the curve when you are on the curve, you are unattainable but efficient.
• Point D- Outside the curve, unattainable.
• Products become unattainable
1. Technology
2. Economic Growth
• How to get inside the curve (Point A)
1. War
2. Famine
3. Unemployment

• Q1: The economy has the ability to produce at which point on the chart? B,D,E (Not 'A' because it is considered outside of the curve.)
• Q2: Which points represents the economy producing its maximum possible quantity of tubas? E
• Q3: At which points on points can the economy not currently produce? A and C. Because 'A' and 'C' are outside of the curve.