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Chapter 1: Life is Economics

Explore the fundamental concepts of economics, including scarcity, opportunity costs, production, rational choices, and the production possibilities frontier. Discover how economists use models to understand past, present, and future economic trends. Learn how to make rational choices based on value and gain insights into the factors that affect economic growth.

carolmiller
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Chapter 1: Life is Economics

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  1. Chapter 1: Life is Economics

  2. What is Economics? • Why should we study Economics?

  3. Section A: Unlimited Wants and Limited Resources • Scarcity • Does scarcity affect all of the following?: • Consumers • Businesses • Government

  4. Trade-Offs and Opportunity Costs Ted and his Girlfriend pg. 11 What are Ted’s trade-offs and costs? His girlfriends? Is there an opportunity cost to not doing homework? Section B: Opportunity Costs

  5. Section C: From Resources to Products. • Production • Resources • Factors of Production • Natural Resources • Labor • Capital • Entrepreneurship

  6. Section D: How Economists Use Models • Model • Based on assumptions • Used to understand past, present and future. • Often change • Used by government and business

  7. Section E: Making Rational Choices • Rational Choice- Taking greater value over those with lesser values. • Different opinions make it hard

  8. Positive Statements • Facts that can be proven • Normative Statements • Opinion • Cannot be proven • People can disagree

  9. Section F: Production Possibilities Frontier • Different combinations of two products that can be produced from a given quantity of the four factors of production.

  10. Crusoe’s Possibilities

  11. Can Crusoe produce outside the PPF? What does it mean if he is producing inside the PPF? How could he move the PPF outward?

  12. Point A: Working at LESS THAN maximum efficiency. • Opportunity cost does NOT have to be paid because to achieve more grain you do not necessarily have to give up more wine. You just need to be more efficient.

  13. Points ON the curve: Maximum Efficiency Because you are maximally efficient along the curve, it is NOT possible to move to another point along the curve without an opportunity cost being paid.

  14. Point B: Moving beyond the curve. • Only possible if the curve is EXPANDED. • How do you move out the curve? • Improve the Quality and Quantity of your factors of production (FOP) • Examples: Better tools, technology, education, population growth, etc.

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