Macroeconomics : Branch of economics that studies decision-making for the economy as a whole
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Chapter 1- Introduction to Economics Economics : The study of how society chooses to allocate its scarce resources in order to satisfy unlimited wants Microeconomics : Branch of economics that studies decision-making by a single individual, household, firm, industry or level of government. Macroeconomics : Branch of economics that studies decision-making for the economy as a whole Definition
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Definition. Economics : The study of how society chooses to allocate its scarce resources in order to satisfy unlimited wants. Microeconomics : Branch of economics that studies decision-making by a single individual, household, firm, industry or level of government. - PowerPoint PPT Presentation
Transcript of Macroeconomics : Branch of economics that studies decision-making for the economy as a whole
Chapter 1- Introduction to Economics
Economics: The study of how society chooses to allocate its scarce resources in order to satisfy unlimited wants
Microeconomics: Branch of economics that studies decision-making by a single individual, household, firm, industry or level of government.
Macroeconomics: Branch of economics that studies decision-making for the economy as a whole
Definition
Chapter 1- Introduction to Economics
Economics
Money, Power, RespectBy
Ms. C. Ibena-BerryModified for East High - Period 5!
Chapter 1- Introduction to Economics
Economics• Outline for the semester• Materials • Requirements• Ticket out• Song just for you….• ”Money, Power, Respect
http://www.youtube.com/watch?v=_K4lZBxGTnM&feature=player_detailpage
Chapter 1- Introduction to EconomicsProblem of Scarcity
Scarcity: The condition in which human wants are forever greater than the available supply of time, goods, and resources.
What will be Produced?
How will it be Produced?
For whom will it be produced?
3 Economic Questions
Chapter 1- Introduction to Economics
Positive Economics: An analysis limited to statements that are verifiable
Normative Economics: An analysis based on value judgment
Positive vs. Normative
Chapter 1- Introduction to EconomicsScarce Economic Resources
Factors of Production (FOP): The resources used to create goods and services
Land: Any natural resource provided by nature.
Labor: The mental and physical capacity of workers to produce goods and services.
Capital: Any physical man-made good used to produce other goods.
Entrepreneurship: Vision, skills, and risk-taking needed to create and run a business.
Chapter 1- Introduction to EconomicsOpportunity Cost
Opportunity Cost: The best alternative sacrificed for a chosen alternative
Trade-off: Any alternative that could be chosen
Chapter 1- Introduction to Economics
Adam Smith: Scottish Economist (1723-1790)
The Invisible Hand Theory
“It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest
Chapter 1- Introduction to EconomicsProduction Possibilities Curve — Marginal Analysis
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PPC
UUnderutilization
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Unattainable point
Production Possibilities Curve
A curve that shows the maximum combinations of two outputs that an economy can produce, given available LLC.
Assumptions about the PPC
• Fixed Resources
• Fully Employed Resources
• Technology Unchanged
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Chapter 1- Introduction to EconomicsProduction Possibilities Curve — Law of Increasing Opportunity cost
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PPC20
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The Law of Increasing Opportunity Costs
The principle that the opportunity cost increases as production of one output expands.
This is responsible for the “bowed shape” of the PPC.
Reasoning
• not all workers are equally suited to producing one good , compared to another.
• as we shift production levels of butter, we gradually tap into the best gun-making resources
Marginal Analysis
An examination of the effects of additions to or subtractions from a current situation.
Chapter 1- Introduction to Economics
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PPC2
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Production Possibilities Curve — Movements and Shifts
Shifts in the PPC
Changes (increases) in the levels of a country’s LLC will cause the PPC to shift from PPC1 to PPC2
Movements along the PPC
Changes in the needs and wants cause a country to choose a different point along an existing PPC
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