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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
more marketable

17
Chapter 2 Economic Activities Producing and
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
21
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