Authors libby rittenberg 105

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The ideas of comparative advantage and specialization suggest that
restrictions on international trade are likely to reduce production of
goods and services.



Economic growth is the result of increasing the quantity or quality of
an economy’s factors of production and of advances in technology.



Policies to encourage growth generally involve postponing
consumption to increase capital and human capital.



Market capitalist economies have generally proved more productive
than mixed or command socialist economies.



Government plays a crucial role in any market economy.

TRY IT!
Draw a production possibilities curve for an economy that can
produce two goods, CD players and jackets. You do not have numbers
for this one—just draw a curve with the usual bowed-out shape. Put
the quantity of CD players per period on the vertical axis and the
quantity of jackets per period on the horizontal axis. Now mark a

point A on the curve you have drawn; extend dotted lines from this
point to the horizontal and vertical axes. Mark the initial quantities of
the two goods as CDA and JA, respectively. Explain why, in the absence
of economic growth, an increase in jacket production requires a
reduction in the production of CD players. Now show how economic
growth could lead to an increase in the production of both goods.

Case in Point: The European Union and the
Production Possibilities Curve
Figure 2.16

Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

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