Chapter 2 Thinking Like am Economist

Salida, Colorado is a small mountain town that exhibits a strong sense of community. And through this sense of community, locals tend to want to help and support the other members of the local economic base. Some studies have shown that a larger portion of every dollar stays in a local community when spent at a local merchant. As a small city Salida merchants often can't compete with larger markers or online marketplaces. 

Limiting factors for goods being sold by local merchants could be the customer base, trends outpacing local sourcing, or greater expense in shipping or supplies among others. These factors would set the production possibilities frontier or PPF limits which could be demonstrated in a graph. For example,consider a ski shop selling ski clothing. High prices would limit purchases but at a higher profit, while lowering the cost sells more suits for less profit.

I think what the economist in the video misses is that buying local doesn't necessarily have to mean locally sourced from sheep to sweater in my opinion. Buying local is choosing to shop at local shops or merchants to buy the things you might buy but not typically in the local marketplace. The local shop is selling the same snowsuit as a larger online or national retailer manufactured in the same factors abroad, but buy buying local you are putting money into the hands of your community and perhaps more of that money stays local and supports the community as a whole.

Efficiency on a PPF graph is producing the correct amount of widgets with the resources available. This is shown graphically when a point of production falls on the PPF line between widgets produced and the resources available.