1 / 19

CHS ECONOMICS

CHS ECONOMICS . CHAPTER 1. Four Factors of Productions. 1. Land Anything that is a “gift of nature” i.e. whale 2. Labor The physical and mental talents that go into producing a good or service 3. Capital All of the manufactured items that aid in the production of a good

kaycee
Download Presentation

CHS ECONOMICS

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CHS ECONOMICS CHAPTER 1

  2. Four Factors of Productions • 1. Land • Anything that is a “gift of nature” i.e. whale • 2. Labor • The physical and mental talents that go into producing a good or service • 3. Capital • All of the manufactured items that aid in the production of a good • 4. Entrepreneurial Ability • Innovator that combines the other 3 FOP’s • Risk bearer – has no guarantee for profit • Makes all of the strategic business decisions

  3. Production Possibilities Model • Macroeconomic model of all of the alternatives and choices society faces in allocating resources (book page #11)

  4. Production Possibilities Model • Assumptions we will make • 1. Full employment • Economy is employing or using all available resources i.e. No leftovers • 2. Fixed Resources • Quantity and Quality of the Factors of Production are fixed • 3. Fixed Technology • The state of technology is constant • 4. Two Goods • Only making Pizzas (consumer good) and Industrial Robots (capital good)

  5. Production Possibilities Table • Lists the different combinations of products that can be produced with a specific set of resources assuming full employment (book page #11) • You can choose to make either product • But there will ALWAYS be a cost • You will always be sacrificing either short-term goals or long-term goals (hence a trade-off)

  6. Production Possibilities Table • Let’s think about it: • If you would quit school today you could get a job and be making money for the rest of the school year and make more money than the students who stayed in school. • BUT • If you stay in school and forgo the short-term money, you will make much more money in the future

  7. Production Possibilities Curve • Some Details • Otherwise more fondly known as the PPC • It depicts what can be produced using fully-employed resources (book page #12) • Each point on the curve represents the maximum output of the two products

  8. Production Possibilities Curve • More fun facts • The curve is a constraint because it shows the limit of attainable outputs (Similar to a budget line) • Points on the curve are: • Attainable as long as the economy uses all of its resources i.e. full employment • Points inside the curve are: • Attainable, but are less than ideal and do not reflect full-employment i.e. under employment • Points beyond the curve are: • Unattainable, because there are not enough resources

  9. Production Possibilities Curve • The Pregnancy Analogy: • When the baby is inside. It is attainable, but under-developed • When the baby is born. It is attainable, and fully grown using all of the resources • A baby could not be bigger than the mother’s body. Therefore it is unattainable and impossible unless the mother was bigger, but if it was possible it would be a really big baby.

  10. Law of Increasing Opportunity Cost • Think of this: • You are producing apples and want to produce more • Think about the factors of Production • What do you need to produce the apples?

  11. Law of Increasing Opportunity Cost • Let’s take it a bit further: • Is it possible to produce apples in the desert?

  12. Law of Increasing Opportunity Cost • So: • The LOIC states that when considering the production of a particular good • The opportunity cost for each additional item being made increases • Why? • Resources are not always adaptable to a making a good

  13. Optimal Allocation • Where MB=Marginal Benefit, equals Marginal Cost (book page # 13 & 14) • Remember society should only produce when the benefits exceed or equal the cost (its Common Sense)

  14. Unemployment • There are always periods and dips where the economy of a country is not at full employment • If we take away the assumption of full employment • We can be at any point within the PPC • To regain full employment we must move from that point to a point on the PPC

  15. A Growing Economy • By dropping the assumptions that the QTY and Quality of resources and technology are fixed • We can have the PPC shift and the potential maximum output of the economy will change • Advances in or new technology, resources, or use of resources will shift the curve outward • Economic Growth occurs (A larger total output)

  16. Economic Growth • Is the result of: • Increases in supplies or resources • Improvements in resource quality • Technological advances • Can allow for: • Increases in both consumer and capital goods instead of one or the other

  17. Present Choices and Future Possibilities • On the PPC • One axes of the graph is “goods for the present” • The other is “goods for the future” • You trade-off “present” for “future” • Neither is wrong • It depends on the economy and what they want • Their UTILITY

  18. International Trade • The PPC only concerns your economy • But if you trade with another economy you might be able to do more • Because of Specialization

  19. International Trade • Think about this: • Country A • Specializes in producing computers • Country B • Specializes in producing apples • They can trade with one another and limit their marginal cost and increase their marginal benefit

More Related