Macroeconomics : Branch of economics that studies decision-making for the economy as a whole

1. Definition Economics: The study of how society chooses to allocate its scarce resources in order to satisfy unlimited wants Microeconomics: Branch of economics that studies decision-making by a single individual, household, firm, industry or level of government. Macroeconomics: Branch of economics that studies decision-making for the economy as a whole

2. Economics Money, Power, Respect By Ms. C. Ibena-Berry Modified for East High - Period 5!

3. Economics • Outline for the semester • Materials • Requirements • Ticket out • Song just for you…. • ”Money, Power, Respect http://www.youtube.com/watch?v=_K4lZBxGTnM&feature=player_detailpage

4. Problem of Scarcity Scarcity: The condition in which human wants are forever greater than the available supply of time, goods, and resources. 3 Economic Questions What will be Produced? How will it be Produced? For whom will it be produced?

5. Positive vs. Normative Positive Economics: An analysis limited to statements that are verifiable Normative Economics: An analysis based on value judgment

6. Land: Any natural resource provided by nature. Labor: The mental and physical capacity of workers to produce goods and services. Capital: Any physical man-made good used to produce other goods. Scarce Economic Resources Factors of Production (FOP): The resources used to create goods and services Entrepreneurship: Vision, skills, and risk-taking needed to create and run a business.

7. Opportunity Cost Trade-off: Any alternative that could be chosen Opportunity Cost: The best alternative sacrificed for a chosen alternative

8. Adam Smith: Scottish Economist (1723-1790) The Invisible Hand Theory “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest

9. A 160 Z B 140 Unattainable point 120 Guns 100 U C 80 Underutilization 60 40 PPC 20 D 20 40 60 80 100 120 Butter Production Possibilities Curve — Marginal Analysis Production Possibilities Curve A curve that shows the maximum combinations of two outputs that an economy can produce, given available LLC. Assumptions about the PPC • Fixed Resources • Fully Employed Resources • Technology Unchanged

10. Guns A 160 B 140 120 C 100 80 60 40 PPC 20 D 20 40 60 80 100 120 Butter Production Possibilities Curve — Law of Increasing Opportunity cost Marginal Analysis An examination of the effects of additions to or subtractions from a current situation. The Law of Increasing Opportunity Costs The principle that the opportunity cost increases as production of one output expands. This is responsible for the “bowed shape” of the PPC. Reasoning • not all workers are equally suited to producing one good , compared to another. • as we shift production levels of butter, we gradually tap into the best gun-making resources

11. Guns 160 B 140 120 100 C A 80 60 40 20 PPC1 PPC2 20 40 60 80 100 120 Butter Production Possibilities Curve — Movements and Shifts Shifts in the PPC Changes (increases) in the levels of a country’s LLC will cause the PPC to shift from PPC1 to PPC2 Movements along the PPC Changes in the needs and wants cause a country to choose a different point along an existing PPC