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Chapter 1 What is Economics About

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Economics is only about inflation, interest rates, unemployment, and other such things ... interesting in high school, so it isn't going to be interesting now ... – PowerPoint PPT presentation

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Title: Chapter 1 What is Economics About


1
Chapter 1 What is Economics About
2
Appendix A
  • Working with Diagrams

3
Types of Relationships between variables
  • Direct
  • Positive
  • Inverse
  • Negative
  • No Relationship
  • Variables are independent

4
Two-Variable Diagram Representing an Inverse
Relationship
5
Two-Variable Diagram Representing a Direct
Relationship
6
Two Diagrams Representing Independence between
Two Variables
7
Slope
  • Used to see how a variable changes in response to
    another variable changing

8
To calculate slope
  • Find two points on any straight line

9
What sign do you expect the slope to have?
  • Direct relationship
  • Positive
  • Inverse relationship
  • Negative
  • No Relationship
  • 0 or infinity

10
Calculating Slopes
11
Calculating Slopes
12
The 45 Line
13
Homework
  • Chapter 1
  • Questions 4, 5, 7, 8
  • Chapter 1 Appendix
  • Questions 6, 7, 9

14
In-class exercise 1
  • Do we understand Chapter 1?

15
Appendix B
  • Should you major in Economics??

16
Five myths about economics and an economics major
  • Economics is all mathematics and statistics
  • Economics is only about inflation, interest
    rates, unemployment, and other such things
  • People become economists only if they want to
    make money
  • Economics wasnt very interesting in high school,
    so it isnt going to be interesting now
  • Economics is a lot like business, but business is
    more marketable

17
Chapter 2 Economic Activities Producing and
Trading
18
Efficiency
  • Efficiency of Production is goal
  • If a firm is producing the max possible given
    available resources and technology

19
Production Possibility Frontier (PPF)
  • Shows all possible combinations of goods for a
    particular economy at a particular point in time,
    given its resources and technology constraints

20
Production Possibilities Frontier for Grades
21
Production Possibilities Frontier for Grades
22
Where are we on the PPF?
  • Can we be on the PPF?
  • Yes!
  • efficient
  • Can we be under the PPF?
  • Yes!
  • Inefficient
  • Can we be over the PPF?
  • NO

23
Two types of Production Possibility Frontiers
  • Constant Opportunity Costs
  • STRAIGHT LINE
  • DOWNWARD SLOPED (inverse relationship)
  • 1 to 1 relationship (slope constant)

24
Production Possibilities Frontier (Constant
Opportunity Costs)
25
Production Possibilities Frontier (Constant
Opportunity Costs)
26
Second Type of PPF
  • Changing Opportunity Costs
  • BOWED OUT PPF
  • Real world PPF
  • Changing slope with every point

27
Production Possibilities Frontier (Changing
Opportunity Costs)
28
Production Possibilities Frontier (Changing
Opportunity Costs)
29
Law of Increasing Opportunity Costs
  • Goes along with CHANGING OPPORTUNITY COSTS
  • As more of a good is produced the opportunity
    cost to produce that good increases.

30
A Summary Statement about Increasing Opportunity
Costs and a Production Possibilities Frontier
That Is Bowed Outward (Concave Downward)

31
Economic Concepts illustrated by PPF
  • Scarcity
  • Choice
  • Opportunity Costs
  • Law of Increasing Opportunity Costs
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