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Chapter 1 What is Economics About

Chapter 1 What is Economics About. Appendix A. Working with Diagrams. Types of Relationships between variables. Direct Positive Inverse Negative No Relationship Variables are independent. Two-Variable Diagram Representing an Inverse Relationship.

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Chapter 1 What is Economics About

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  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 wasn’t very interesting in high school, so it isn’t 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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