Friday, January 23, 2015

Resources and Scarcity

Today in Principles of Microeconomics I introduce the first economic model of the course called the production possibilities frontier.  It is a very simple model of economic activity to mainly demonstrate the idea of an opportunity cost from making a production choice.

One of the implications of the production possibility frontier is scarcity, given the assumption of fixed resources.  Over time if resources are fixed, then production must fall due to the decline in resources available to produce goods and services.  Here is an excellent article questioning why using more resources may not cause scarcity from an economic perspective.

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