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Chapter 2

Chapter 2. The Economic Activities. Production Possibilities Curve. Maximum amounts of two goods that can be produced at full employment Graph Points 1. On – full employment 2. Inside – unemployment 3. Between the curves - overemployment 4. Beyond - unattainable.

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Chapter 2

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  1. Chapter 2 The Economic Activities Buffland Economics

  2. Production Possibilities Curve • Maximum amounts of two goods that can be produced at full employment • Graph • Points • 1. On – full employment • 2. Inside – unemployment • 3. Between the curves - overemployment • 4. Beyond - unattainable Buffland Economics

  3. Law of Increasing Costs – as more of a good is produced you must give up larger amounts of the other good • Shifting the PPC • Increase the quantity and/or the quality of resources Buffland Economics

  4. Economic Growth • Developing Countries – concentrate on capital goods Buffland Economics

  5. Economic Systems Part 1 • Traditional – Inherited • Economic Stability, strong family, no innovation or modern conveniences • Based on Religion or Custom • Handed down • Score • No Economic Growth • No inflation • No Unemployment • No Economic Freedom Buffland Economics

  6. Economic Systems Part 2 • Market (Capitalism) – runs itself • No central planning • Prices signal our behavior by providing incentives • Private property • Freedom of enterprise and choice • Self-interest • Competition • Adam Smith • Score • Economic growth • Inflation • Unemployment • Economic freedom Buffland Economics

  7. Economic Systems Part 3 • Command (Socialism) – Imposed upon society • Central planning • Common property • No Freedom of Choice • Score • Economic Growth • No inflation • No unemployment • No Economic Freedom Buffland Economics

  8. Questions a society must answer • What will be produced? • Goods that provide a profit • How will they be produced? • Least cost method of production • For whom are the goods produced? • Whoever has the money Buffland Economics

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