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3 -- Part 5: Economic Institutions
Most are outward bowed of inputs shift the production inefficiency; points to the combination of outputs that because of the cost of producing possibility curve out.
There are points of efficiency and points of inputs.
The bility curve shifts along the possibility curve if the production possi outside the production cost doesn't change.
When making small amounts of guns and large amounts of butter, we use the resources that have the advantage in the production of guns.
Producing butter is one of the resources devoted to it.
We're not giving up much butter to get those guns because the resources used in producing guns aren't good at producing butter.
As we produce more and more of a good, we must use resources that are more suited for butter production than for guns.
We must give up increasing amounts of butter as we remove resources from the production to get the same amount of guns.
Guns' costs in terms of butter increase because we're using resources to produce guns that have a comparative advantage.
Let's look at two more examples.
The United States suddenly needs more wheat.
We must devote more land to grow wheat.
Our additional output of wheat per acre of land devoted to wheat will be less because this land is less fertile than the land we're already using.
Relief pitchers can be used in a baseball game.
If only one relief pitcher is needed, the manager sends in the best, if he must send in a second, a third, and even a fourth, the likelihood of winning the game decreases.
Determine the point of inefficiency and efficiency.
If possible, we would like to get as much output from a given amount of inputs as possible.
We can see what is meant by productive efficiency by using the production possibility curve.
We can see what is meant by efficiency by using the production possibility curve.
The production possibility curve is inefficient.
We can't go beyond the production possibility curve with existing inputs and technology.
Technology improves how the curve shifts.
The production possibility curve is the most output we can get from certain inputs.
When technology improves and more resources are discovered, we can get more output with the same inputs.
How technology improves will affect the production possibility curve.
We become more efficient at making butter, but not more efficient at making guns.
In real-world situa tions, such questions cannot be ignored.
We can't say that one trucking business in Saudi Arabia will help some people but hurt others.
The method of production is more efficient than the other, even if one method pro managers have noticed that women are paid less than men.
The term only means that a hiring women would be more efficient.
Say that we have a society of people who believe in that.
Producing more for less would not be efficient since consumption is not the goal.
We have a society that cares about the distribution of things.
An increase in output that only goes to one person would not be efficient.
You don't have to retrace your path and start over with the production possibility curve.
Life has thousands of branches, and each decision you make there are two choices, one with a higher cost and one with rules out other paths, or at least increases their costs.
Most choices are not good.
One con path requires you to return to the beginning.
The following text may not make sense in another.
"Would society be better but it raises the costs of options along another path?"
is a question that can be asked if one path lowers the costs of options.
A decision tree is a visual description of text.
The goal of a developing country increases sequential choices.
A decision tree can be seen in the material output.
In a developed country, growth in material output is more important than teaching literature.
When interpreting the production possibility curve, it is important to recognize the contextual nature of decisions.
The production possibility curve for a decision can only be analyzed in historical and institutional contexts because decisions are contextual.
B possibility curve is more than just a technical phenomenon.
The costs of path B options become higher when you make the initial decision to go on path A, as the curve is an engine of analysis to make contextual choices.
Many policies have rela tively small distributional consequences because most people prefer more to less.
On the basis of the assumption that more is more, economists use their own kind of shorthand for such policies and talk about efficiency as identical to productive efficiency--increasing total output.
It's important to remember that the distributional effects of the policy are considered acceptable and that we prefer more output.
Some situations that can be shown with the production possibility curve can be examples of Shifts.
There are four situations.
Half of the earth's natural resources are destroyed by a meteorite.
A natural disaster hits the 2.
The cost of manufactured goods can be lowered.
There is a new technology that can double the speed at which goods can be produced in the U.S.
Climate change makes it more expensive to produce agricultural goods.
The correct answers are 1-d, 2-a, 3-b, and 4-c.
You are well on your way to understanding the production possibility curve if you got them all right.
The curves reflect different types of shift.
Your assignment is to match the shifts with the situations in the text.
The basics of the production possibility curve have been covered.
The guns and butter produc tion possibility example I presented earlier should remind you of the argument.
We gain a lot of guns for little butter because we take resources away from producing butter that had a comparative advantage in pro ducing guns.
A society wants to be on the edge of its production possibilities.
Individuals have to produce goods for which they have a comparative advantage.
How to direct individuals toward those activities is a question for society.
The answer is easy for a firm.
The firm's resources can be used by a manager.
He or she can assign an employee with good people skills to the human resources department and another with good research skills to research and development.
He argued that humankind's proclivity to trade leads to individuals using their comparative advantage.
This division of labour, from which so many advantages are derived, is not the result of any human wisdom at all.
Adam Smith argued that it is necessary, though very slow and gradual, because of a certain propensity in human nature.
A dog makes a fair and deliberate exchange of one bone for another with another dog.
I am willing to give this for that, because nobody has ever seen one animal by its gestures and natural cries signifying to another.
Smith argues that the market will guide people to gravitate toward activities with a comparative advantage as long as people trade.
The growth of economies can show the effect of trade on our well-being.
The world economy grew very slowly for 1,700 years.
The world economy grew rapidly at the end of the 18th century.
The spread of democracy is aided by the introduction of markets.
There is something about markets that leads to growth.
There are markets that allow specialization and age trade.
A small part of the story is the bow out of the production possibility curve.
As individuals compete and specialize, they become even better at what they do.
Competition pushes indi viduals to find better ways of doing things.
New tech nologies are created to further the growth process.
Markets can be as simple as selling lemonade at a cialize in the new millennium.
There are many businesses on the stand.
The world economy grew slowly for 1,700 years.
The $4,000 world economy has grown at increasing rates since the end of the 18th century.
Thinking Like an Economist is providing online competition for traditional colleges.
Online stores are growing.
As internet technology builds into our economy, we can expect more specialization, more division of labor, and more economic growth.
When Gains from Trade sells you meat, he's better off with the money you give him, and you're better off with voluntary trade.
Voluntary trade is a win-win.
When there is competition in trading, individuals are able to pick the best trades available to them, and each individual drives the best bargain he or she can.
Both individuals in the trade benefit from what others are willing to trade.
Laissez-faire is a precept in economics because it extends the implications of a model to reality and draws conclusions about the real world.
It is based on judgments about the relevance of the model, as well as assumptions about which the model is based.
In the absence of trade, the most each country can consume is a combination.
If each specialized, doing what it does best, and then traded with the other, what would happen?
The production and consumption decisions are separated by this.
It makes sense for Belgium to specialize in that.
4 tons of chocolate and 4,000 yards of textiles can be produced by Steve.
8 dozen cookies a day would be divided between the countries.
Both are consuming beyond their production possibility curves.
These gains lead to economists' support of free trade.
The pressure to find comparative advantages is never-ending.
Those involved in the trade will be better off.
Each country can consume a combination of goods if it specializes and takes advantage of its comparative advan tage.
Producing textiles in Belgium is 500 yards and 2 tons.
Two countries can labor and have a low-cost source of power.
As the cost of U.S. labor went up, the comparative advantage disappeared.
The countries with it have a comparative advantage.
Total costs have fallen as firms have moved production to Bangladesh.
Trade is a two-way street.
In return for Bangladesh's textiles, the United States sends computer software and airplanes, products that would be difficult to produce on its own.
The trade makes Bangladeshi consumers better off.
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