WealthWealth

Warm Up:Warm Up:

How do you define How do you define Wealth??? Wealth???

Wealth-How do Wealth-How do youyou define it??? define it???

Are these all pictures/illustrations of wealth???

NOPE!!!!!NOPE!!!!!

WEALTH is resources and WEALTH is resources and the ability to make goods the ability to make goods and services from these and services from these

resources!!!resources!!!

What do you have that makes What do you have that makes youyou wealthy right now?? wealthy right now??

Remember the Economic Remember the Economic Problem…Problem…

SCARCITY!!SCARCITY!!

of what????of what????

ECONOMICECONOMIC

RESOURCESRESOURCES

Types of ResourcesTypes of ResourcesREVIEWREVIEW

Goods v. ServicesGoods v. Services

Good -- An item you can see, feel, and Good -- An item you can see, feel, and touch and that requires scarce resources to touch and that requires scarce resources to produce and satisfies human wantsproduce and satisfies human wants

Services -- Something that is not physical Services -- Something that is not physical that requires scarce resources to produce that requires scarce resources to produce and satisfies human wantsand satisfies human wants

=>With your partner list 3 Goods & 3 =>With your partner list 3 Goods & 3 Services…Services…

Types of Resources – cont.Types of Resources – cont.

NaturalNatural -- -- So-called “gifts of nature” used to produce So-called “gifts of nature” used to produce goods and services; includes renewable and exhaustible goods and services; includes renewable and exhaustible resourcesresources RenewableRenewable – A natural resource that can be drawn – A natural resource that can be drawn

on indefinitely if used conservatively such as the on indefinitely if used conservatively such as the atmosphere or water supplyatmosphere or water supply

ExhaustibleExhaustible – A natural resource that does not renew – A natural resource that does not renew itself and so is available in a finite amount such as oil itself and so is available in a finite amount such as oil or copper oreor copper ore

ProductiveProductive – – The inputs, or factors of production, The inputs, or factors of production, used to produce the goods and services that people used to produce the goods and services that people wantwant

How to achieve economic How to achieve economic growth and become…growth and become…

WEALTHY!!WEALTHY!! 1.1. Increase ResourcesIncrease Resources (if you have more (if you have more

things, you can produce more goods and things, you can produce more goods and services)services)

2.2. Improve technologyImprove technology (can make things (can make things better and/or faster)better and/or faster)

3.3. Increase capital goodsIncrease capital goods (use machines (use machines to get the job done faster)to get the job done faster)

4.4. Educate and train the labor forceEducate and train the labor force (employees will become more efficient)(employees will become more efficient)

Production Possibilities Curve Production Possibilities Curve (PPC)(PPC)

It represents the “potential production” It represents the “potential production” of a combination a of a combination a consumer goodconsumer good (i.e. (i.e. pizza, haircut) and a pizza, haircut) and a capital goodcapital good (i.e. (i.e. pizza oven, hair clippers) that can be pizza oven, hair clippers) that can be produced if all available resources are produced if all available resources are present in a given year.present in a given year.

Two Assumptions:Two Assumptions:1.1. All resources are being usedAll resources are being used2.2. There is no unemploymentThere is no unemployment

Production Possibilities Curve Production Possibilities Curve (PPC)(PPC)

Points along the curve represent the Points along the curve represent the possiblepossible combinations of the two goods that combinations of the two goods that can be produced when the economy’s can be produced when the economy’s resources are used efficientlyresources are used efficiently

Shows Shows efficientefficient and and inefficientinefficient combinations combinationsShows Shows attainableattainable and and unattainableunattainable

combinationscombinations

Production Possibilities Curve Production Possibilities Curve (PPC)(PPC)

Movement along the PPC involves giving Movement along the PPC involves giving up some of one good to get more of the up some of one good to get more of the other – what is this called?other – what is this called?

Movement down the curve indicates that Movement down the curve indicates that the the opportunity costopportunity cost of more capital of more capital goods is fewer consumer goods and vice goods is fewer consumer goods and vice versa.versa.

PPCPPC

YY

66

6 X6 X

Correctly label and draw the PPC for Correctly label and draw the PPC for the following problem.the following problem.

X axis=consumer goodsX axis=consumer goods Y axis=military goodsY axis=military goods A=attainable areaA=attainable area B=unattainable areaB=unattainable area C=all military productionC=all military production D=all consumer productionD=all consumer production E=greatest opportunity cost in E=greatest opportunity cost in

military goods when both types military goods when both types of goods are being producedof goods are being produced

F=greatest opportunity cost in F=greatest opportunity cost in consumer goods when both consumer goods when both types of goods are being types of goods are being producedproduced

G=equal use of resourcesG=equal use of resources H=no productionH=no production

Identify the points-what does each Identify the points-what does each point represent on this graph???point represent on this graph???

yy

a.

b.

d.

c.

LABEL THE WORDS THAT DESCRIBE EACH POINT:

Possible

Impossible

Efficient

Inefficient

x

Practicing the PPC!!!Practicing the PPC!!!

YY

1010

10 X10 X

Correctly label and draw the PPC for Correctly label and draw the PPC for the following problem.the following problem.

X axis=applesX axis=apples Y axis=orangesY axis=oranges A=all apple production onlyA=all apple production only B=all orange production onlyB=all orange production only C=no productionC=no production D=equal use of resourcesD=equal use of resources E=attainable areaE=attainable area F=unattainable areaF=unattainable area G=greatest opportunity cost in G=greatest opportunity cost in

apples when both goods are being apples when both goods are being producedproduced

H=greatest opportunity cost in H=greatest opportunity cost in oranges when both goods are oranges when both goods are being producedbeing produced

I=8 apples, 4 orangesI=8 apples, 4 oranges J=3 apples, 3 orangesJ=3 apples, 3 oranges

Increased production will shift the PPC to the Increased production will shift the PPC to the right. The more it shifts to the right, the greater right. The more it shifts to the right, the greater

the economic growth.the economic growth. yy

xx

Which graph shows more economic Which graph shows more economic growth??? And why???growth??? And why???

Graph AGraph A Graph BGraph B

Three Reasons That Prevent Some Three Reasons That Prevent Some Countries From Shifting their PPC to Countries From Shifting their PPC to

the right:the right:1.1. Inefficient Labor Force (if you are being Inefficient Labor Force (if you are being

unproductive, your economy cannot unproductive, your economy cannot grow)grow)

2.2. No Loans (you can’t invest in economic No Loans (you can’t invest in economic growth in your economy)growth in your economy)

3.3. Poor Trade Practices (you have nothing Poor Trade Practices (you have nothing to trade)to trade)

Wrap-Up/ReviewWrap-Up/Review

Below each question/next to Below each question/next to each question, or on a separate each question, or on a separate sheet of paper, briefly explain sheet of paper, briefly explain

how you know that is the how you know that is the CORRECT answer!!!CORRECT answer!!!

1. What purpose does the production 1. What purpose does the production possibilities curve serve?possibilities curve serve?

a.) it determines whether the economy is a.) it determines whether the economy is expanding or experiencing a recessionexpanding or experiencing a recession

b.) it predicts the possible outcomes of a rise in b.) it predicts the possible outcomes of a rise in unemploymentunemployment

c.) it proves that while the production of some c.) it proves that while the production of some goods increases the efficiency of the goods increases the efficiency of the economy, the production of others economy, the production of others decreases the efficiencydecreases the efficiency

d.) it shows the possible combinations of goods d.) it shows the possible combinations of goods that can be produced when available that can be produced when available resources are employed fully and efficientlyresources are employed fully and efficiently

2.2. What do points outside of the PPC What do points outside of the PPC indicate?indicate?

a.) Unattainable combinations of goodsa.) Unattainable combinations of goods

b.) Ideal combination of goodsb.) Ideal combination of goods

c.) Inefficient combination of goodsc.) Inefficient combination of goods

d.) None of the aboved.) None of the above

3. Economic growth effects the PPC by:3. Economic growth effects the PPC by:

a.) Shifting it inwarda.) Shifting it inward

b.) Shifting it outwardb.) Shifting it outward

c.) Causing no change at allc.) Causing no change at all

d.) Turning it into a straight lined.) Turning it into a straight line

4. Suppose that during a given period an 4. Suppose that during a given period an economy produces a large amount of economy produces a large amount of capital goods. What would you expect capital goods. What would you expect to happen to the amount of output to happen to the amount of output produced during the following period?produced during the following period?

a.) Less output would be produceda.) Less output would be produced

b.) More output would be producedb.) More output would be produced

c.) Output would not be affectedc.) Output would not be affected

d.) None of the aboved.) None of the above

5. Suppose that a new machine that 5. Suppose that a new machine that speeds up automobile production is speeds up automobile production is introduced into the auto industry. introduced into the auto industry. This would cause the PPC to:This would cause the PPC to:

a.) Shift outwarda.) Shift outward

b.) Shift inwardb.) Shift inward

c.) Do nothingc.) Do nothing

d.) Not enough information is givend.) Not enough information is given

6. What do points inside the PPC 6. What do points inside the PPC indicate?indicate?

The combination of goods that employ The combination of goods that employ resources efficientlyresources efficiently

Combinations of goods that employ Combinations of goods that employ resources fullyresources fully

The combination of goods that do not The combination of goods that do not employ resources fullyemploy resources fully

None of the aboveNone of the above

7. Which of the following situations might 7. Which of the following situations might cause an inward shift in the cause an inward shift in the production possibilities curve?production possibilities curve?

a.) A computer network shuts down due to a a.) A computer network shuts down due to a virusvirus

b.) More people earn bachelor degreesb.) More people earn bachelor degrees

c.) A new machine that produces bread faster is c.) A new machine that produces bread faster is inventedinvented

d.) OPEC announces a new source of oild.) OPEC announces a new source of oil

8. An increase in the labor force would 8. An increase in the labor force would cause the PPC to:cause the PPC to:

a.) Shift inwarda.) Shift inward

b.) Shift outwardb.) Shift outward

c.) Do nothingc.) Do nothing

d.) Turn into a straight lined.) Turn into a straight line

9. In deciding to go to college, which of 9. In deciding to go to college, which of these may involve an opportunity these may involve an opportunity cost?cost?

a.) Value of goods and services that could be a.) Value of goods and services that could be purchased with money spent on bookspurchased with money spent on books

b.) Value of goods and services that may be b.) Value of goods and services that may be purchased with tuition moneypurchased with tuition money

c.) Value of goods and services that may be c.) Value of goods and services that may be purchased with money spent on boardingpurchased with money spent on boarding

d.) All of the aboved.) All of the above

10. If you must stay at home and study 10. If you must stay at home and study for an upcoming economics test, the for an upcoming economics test, the opportunity cost of studying would opportunity cost of studying would most likely be highest at which of the most likely be highest at which of the following times?following times?

a.) Monday eveninga.) Monday eveningb.) Wednesday morningb.) Wednesday morningc.) Thursday afternoonc.) Thursday afternoond.) Friday eveningd.) Friday evening

11. Which of the following statements is 11. Which of the following statements is true of opportunity costs?true of opportunity costs?

a.) It is the value of all alternatives you pass up a.) It is the value of all alternatives you pass up when making a choicewhen making a choice

b.) It is the value of the best alternative you give b.) It is the value of the best alternative you give up when you make a choiceup when you make a choice

c.) It can only be measured in dollar amountsc.) It can only be measured in dollar amounts

d.) It is the same for all individualsd.) It is the same for all individuals

12. Economists assume that which of the 12. Economists assume that which of the following leads the average person to following leads the average person to choose the most valued alternative choose the most valued alternative among a number of possibilities?among a number of possibilities?

a.) Rational self-interesta.) Rational self-interest

b.) Scarcityb.) Scarcity

c.) Opportunity costc.) Opportunity cost

d.) None of the aboved.) None of the above

13. Which of the following would lead to 13. Which of the following would lead to a sunk cost?a sunk cost?

a.) Buying a new CD at an outlet storea.) Buying a new CD at an outlet store

b.) Putting a non-refundable deposit at one b.) Putting a non-refundable deposit at one college and then attending anothercollege and then attending another

c.) Deciding to study on a Friday night instead c.) Deciding to study on a Friday night instead of going to a partyof going to a party

d.) None of the aboved.) None of the above

14. Which of the following describes a 14. Which of the following describes a sunk cost?sunk cost?

a.) Sunk costs can’t be recovereda.) Sunk costs can’t be recovered

b.) Sunk costs have already been incurredb.) Sunk costs have already been incurred

c.) Sunk costs are irrelevantc.) Sunk costs are irrelevant

d.) All of the aboved.) All of the above

15. What is considered the ultimate 15. What is considered the ultimate limiting factor in making choices?limiting factor in making choices?

a.) Wealtha.) Wealth

b.) Knowledgeb.) Knowledge

c.) Timec.) Time