Chapter One Homework

1. Chapter One Homework • Numbers 4, 6, and 8

2. Appendix for Chapter 1 Graphing and Algebra Review

3. Figure 1A.4 The Effect of a Change in Intercept on the Curve

4. Figure 1A.5 The Effect of a Change in Slope on the Curve

5. Figure 1A.6Lines with Zero and Infinite Slopes

6. Figure 1A.7 Graphing a Nonlinear Relationship

7. Slope of a curve • Take the first derivative of the equation • OR…. • Choose two points along the curve • Draw a tangent line between them • Find the slope of the tangent line • This will APPROXIMATE the slope

8. Appendix 1 Homework • Numbers 2, 6, 8, and 10

9. Chapter 2 Efficiency and Allocation in the Global Economy

10. Introduction • Because of scarcity we cannot produce everything. • We have to choose what to produce. • Security or education ? • How are those choices made? • What are the consequences of our choices?

11. Factors of Production • Four basic types of resources, or inputs. • Land, labor, capital, and entrepreneurship • Together, these are known as factors of production. • What and how a nation produces is determined by its factor endowment. • How much of each “we” have.

12. Land • Natural resource used for agriculture, housing, industrial production, and recreation. • Also includes other natural resources: • Water • Gas • Oil Deposits • Minerals • Forests

13. Labor • Physical and mental talents available to produce goods and services. • Labor Force—the number of people over the age of 16 that are willing and able to work. • Human Capital—the knowledge, experience, and innate ability of individuals.

14. Capital • Buildings and equipment that can be used to produce other goods and services. • Also called capital goods or physical capital • Consumption goods cannot be used to produce other goods and services. • Financial capital is the money that firms spend on buildings and equipment.

15. Entrepreneurship • Entrepreneurs organize, operate, and assume the risk of business ventures. • The people with the big ideas

16. Production Technology • The way in which an economy employs the factors of production. • Production function • Q = f(K, L)

17. The Production Possibilities Frontier (PPF) • Graphical representation of the combinations of goods and services that an economy can produce in a given time period.

18. Gross Domestic Product • Market value of all final goods and services produced in a given period in an economy. • GDP per capita measures output per person. • GDP divided by the population • Used when comparing economies of different sizes

19. Figure 2.1(a) The Production Possibilities Frontier (PPF)

20. Figure 2.1(b) The Production Possibilities Frontier (PPF)

21. PPF assumptions • Fixed level of resources • All resources fully employed • Constant level of technology and human capital • What is another name for the slope of the PPF? • Opportunity cost

22. Where can we be on the PPF?? • Can we be • On the curve?? • Yes  efficient • Under the curve?? • Yes  inefficient • Over the curve?? • No  not enough resources