Figure 1.1 and 1.2 in Chapter 1 in the textbook represent the production possibility curve, which is a graphical representation of the combinations of maximum output that can be produced, in this case cars and wheat.
Three assumptions behind the production possibilities curve are: full employment, the use of the best technology, and production efficiency.
Figure 1.3 represents the effect that technology has on the production possibilities curve, most commonly an increase in production of one or more goods, and Figure 1.4 shows different growth rates for two economies based on their choice to emphasize the production of capital goods or consumer goods.
The production possibility curves demonstrate that creating more of one product can significantly reduce the production of another and subsequently create scarcity. When more of one item is produced, you are sacrificing the potential of another and therefore generating an opportunity cost to generate more of one product. Society will choose to produce more of the product in greater demand and must bear the cost and sacrifice associated with its production.
A significant choice that I have to make based on scarcity of income is to be a conscious consumer when it comes to buying no name brand items at the grocery store instead of the brand name items that I have used growing up in a middle-class household. Working in contrast to this would be my scarcity of time, which means that I am buying more often for convenience than for price, i.e. when I'm eating on the run I will pick up something at 7/11 instead of a grocery store which has lower priced groceries.
The opportunity cost of going back to school as opposed to not going to school at all is lower than if I had not gone back. In going back to school I will eventually make a higher income and that decision will be worth more, thus have a lower opportunity cost.
Three assumptions behind the production possibilities curve are: full employment, the use of the best technology, and production efficiency.
Figure 1.3 represents the effect that technology has on the production possibilities curve, most commonly an increase in production of one or more goods, and Figure 1.4 shows different growth rates for two economies based on their choice to emphasize the production of capital goods or consumer goods.
The production possibility curves demonstrate that creating more of one product can significantly reduce the production of another and subsequently create scarcity. When more of one item is produced, you are sacrificing the potential of another and therefore generating an opportunity cost to generate more of one product. Society will choose to produce more of the product in greater demand and must bear the cost and sacrifice associated with its production.
A significant choice that I have to make based on scarcity of income is to be a conscious consumer when it comes to buying no name brand items at the grocery store instead of the brand name items that I have used growing up in a middle-class household. Working in contrast to this would be my scarcity of time, which means that I am buying more often for convenience than for price, i.e. when I'm eating on the run I will pick up something at 7/11 instead of a grocery store which has lower priced groceries.
The opportunity cost of going back to school as opposed to not going to school at all is lower than if I had not gone back. In going back to school I will eventually make a higher income and that decision will be worth more, thus have a lower opportunity cost.
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