Macro Chapter 1 Presentation 3. Quick Check #1 The idea that the limited amount of resources are...
-
Upload
nancy-briggs -
Category
Documents
-
view
215 -
download
1
Transcript of Macro Chapter 1 Presentation 3. Quick Check #1 The idea that the limited amount of resources are...
Macro Chapter 1 Presentation 3
Quick Check #1
• The idea that the limited amount of resources are never sufficient to satisfy people’s virtually unlimited economic wants is known as ____________
• Scarcity
#2 Define Opportunity Cost
• To obtain one more of one thing, society must forgo the opportunity of getting the next best thing
Quick Check #3
• The pleasure, happiness or satisfaction obtained from consuming a good or service is known as ____________
• Utility
Unemployment and Underemployment
• Represented by points inside the PPC
• Not all resources are being utilized
• ***underemployment ex- a lawyer working in retail
Shifts in the PPC
1. Increase in resource supplies- expanded potential output (ie new oil wells)
2. Advances in technology- Ex) computers increase speed and efficiency
Production Possibilities Model
15
10
5
0 1 2 3
a
b
c
d
e
MB = MC
MC
MB
Optimal Allocation of Resources
Quantity of Pizza
Mar
gin
al B
enef
it &
Mar
gin
al C
ost
Budget Line (Constraint)
• The schedule or chart that shows various combinations of two products a consumer can buy with a given amount of money
Budget Line
6543210
02468
1012
DVDs$20
Books$10
12
10
8
6
4
2
02 4 6 8 10 12 14
$120 Budget
Income = $120
Pdvd = $20= 6
Income = $120
Pb = $10= 12
Attainable
Unattainable
Quantity of Books
Qu
anti
ty o
f D
VD
s
Positive Economics (“What is”)
• Focuses on facts and cause-and-effect relationships. Avoids value judgments and tries to establish scientific statements about economic behavior and what the economy is actually like. (Positive about it)
• Ex- The unemployment rate in France is higher than in the US
Normative Economics (“What ought to be”)
• Incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal
• Ex- France should undertake policies to make its labor market more flexible to reduce unemployment
Factors of Production (Inputs)
• 1. Land
• 2. Labor
• 3. Capital
• 4. Entrepreneurial Ability
Land
• Includes all natural resources (“gifts of nature”) used in the production process, such as arable land, forests, mineral and oil deposits, and water resources
Labor
• The physical and mental talents of individuals used in producing goods and services
Capital
• All manufactured aids used in producing consumer goods and services.
• Ex- factory, storage, transportation, and distribution facilities, tools and machinery
Entrepreneurial Ability
• Combines the resources of land, labor and capital to produce a good or service
• Innovator of new products
• Bears the financial risk of business