Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Contemporary Economics: An Applications Approach By Robert J. Carbaugh Chapter 1: Scarcity and Choice Copyright ©2006 by Thomson South-Western. All rights reserved. Scarcity and Opportunity Cost Opportunity cost and choice A Number of compacts 80 Car-wash possibilities B 60 C 40 D 20 E 0 0 10 20 30 40 Number of minivans Carbaugh, Chap. 1 2 Opportunity Cost Production possibilities curve Computers (millions) Possible combinations of computers and VCRs A 6 A 6 B 5 Production possibilities curve (PPC) 4 Attainable and unattainable production combinations Computers (millions) Production possibilities curve (PPC) B 5 F 4 Points along PPC imply no unemployed resources and efficient production C 3 2 1 Unattainable C 3 Foregone output 2 E 1 D 0 0 1 2 3 VCRs (millions) Carbaugh, Chap. 1 Inefficient D 0 0 1 2 3 VCRs (millions) 3 Opportunity Cost Law of increasing opportunity cost Computers (millions) A 6 A bowed outward PPC illustrates increasing opportunity costs B 5 4 C 3 2 1 D 0 0 1 2 3 VCRs (millions) Carbaugh, Chap. 1 4 Changes in the PPC Economic growth on the PPC Computers (millions) E Economic growth is illustrated by an outward shift in a nation’s PPC F 3 G C PPC0 PPC1 0 0 2 VCRs (millions) Carbaugh, Chap. 1 5 Economic Growth Economic growth in U.S. and Japan Consumer goods (hamburgers) United States Next year's production possibilities Consumer goods (hamburgers) Japan Next year's production possibilities Japan's choice to favor capital goods (point A) will shift its future PPC farther out The U.S. choice to produce more consumer goods (point A) limits future production growth A PPC0 PPC0 This year's production possibilities PPC1 Capital Goods (machinery) Carbaugh, Chap. 1 A´ This year's production possibilities PPC1 Capital Goods (machinery) 6 Economic Growth Opportunity cost of national security Security Goods G F E PPC0 PPC1 Nonsecurity Goods Carbaugh, Chap. 1 7 Economic Growth Economic sanctions Iraq Machines A PPC0 (before sanctions) PPC1 (after sanctions) Oil (barrels) Carbaugh, Chap. 1 8 Reading Tables & Graphs Shifting relationships Initial grading standard GPA K 4.0 J 3.0 GPA Revised grading standard 4.0 Lower grading standard 3.0 Rise = 1 I 2.0 2.0 Run = 2 H 1.0 1.0 0 0 0 2 4 6 8 Hours of study time per week Carbaugh, Chap. 1 Higher grading standard 0 2 4 6 8 Hours of study time per week 9 Economic Systems Fundamental economic questions Scarcity Answered by Imposes Type of economic system: - Market economy - Command economy - Mixed economy Fundamental economic questions: - What to produce? - How to produce? - For whom to produce? Carbaugh, Chap. 1 10 Economic Systems Market economy: circular flow model Resource markets Land, labor, capital and entrepreneurship Business firms Rent, wages, interest and profits Households Consumption expenditures Goods and services Product markets Carbaugh, Chap. 1 11