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Please take out 1 piece of graph paper

Please take out 1 piece of graph paper. Clear your desk except for something to write with & a straight edge. Production Possibilities. Feb 27, 2014. Review Questions. I do this the after nearly every discussion/lecture You CANNOT read from your notes to answer them Expect it

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Please take out 1 piece of graph paper

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  1. Please take out 1 piece of graph paper Clear your desk except for something to write with & a straight edge

  2. Production Possibilities Feb 27, 2014

  3. Review Questions • I do this the after nearly every discussion/lecture • You CANNOT read from your notes to answer them • Expect it • Prepare for it • Review the previous notes before class • EASY class participation points

  4. Review Questions

  5. What’s another term for “Resources”? • Factors of Production

  6. Give me 1 of the 5 types of resources • Land • Labor • Capital • Technology • Entrepreneurship

  7. What’s the basic/core problem? • SCARCITY!!!!! • Unlimited wants and limited resources

  8. What’s the formal definition for “Economics”? • The study of how people and nations make choices about how to use their scarce resources to fill their needs and wants

  9. Trade-Offs • All of the alternatives when a decision is made

  10. Opportunity Costs • The next best alternative that had to be given up for the alternative that was chosen.

  11. Opportunity Benefit • What is gained when a decision is made

  12. End of Review

  13. 3 basic/core issues/economic questions that all economies have to address • WHAT to produce with our limited resources • HOW to produce the goods and services • FORWHOM the goods and services should be produced

  14. Goods Versus Services • In this class, we will use the terms “Goods and Services” often. • What’s the difference between the two?

  15. Goods • Tangible items that businesses produce and/or sell • Examples?

  16. Services • Non-tangible work that businesses complete in exchange for money • Examples?

  17. Production Possibilities • the alternative combination of final goods & services that could be produced using all of a country’s resources & tech.

  18. A 5 B 4 C 3 OUTPUT OF TRUCKS D 2 E 1 F 0 1 2 3 4 5 OUTPUT OF TANKS The Production Possibilities Curve

  19. Production Possibilities Illustrates The Principle of • Opportunity costs – we can obtain additional quantities of any desired good only by reducing the potential production of another good.

  20. A Step 1: give up one truck 5 B 4 Step 3: give up another truck Step 2: get twotanks C 3 OUTPUT OF TRUCKS Step 4: get one more tank D 2 E 1 F 0 1 2 3 4 5 OUTPUT OF TANKS

  21. The Cost of North Korea’s Military A P G Reduced food output FOOD OUTPUT N C Military buildup O H D B MILITARYOUTPUT

  22. 16.3 12.0 4.1 3.8 3.4 2.8 2.7 1.5 1.2 1.0 0.9 0.5 India USA Japan China Bosnia Jamaica Mexico N. Korea Canada Germany S. Korea Saudi Arabia The Military Share of Output Percent of Output Allocated to Military

  23. Efficiency • Efficiency means getting the maximum output of a good from the resources used in production. • Every point ON a production possibilities curve is EFFICIENT.

  24. Inefficiency • A production possibilities curve shows potential output, not necessarily actual output. • If we are inefficient, actual output will be less than the potential output.

  25. Countries may end up inside their production possibilities curve if resources are inefficiently used.

  26. Inefficiency Inefficiency A 5 B 4 C Y 3 OUTPUT OF TRUCKS 2 1 1 2 3 4 5 0 OUTPUT OF TANKS

  27. A point outside the production possibilities curve suggests that we could get more goods than we are capable of producing! • Is this possible?!

  28. Currently not attainable Economic Growth A X 5 B 4 C 3 OUTPUT OF TRUCKS 2 1 1 2 3 4 5 0 OUTPUT OF TANKS

  29. Economic Growth • An expansion of production possibilities. • How? • An increase in the quantity and/or quality of a country’s factors of production • Land • Labor • Capital • Entrepreneurship • Technology

  30. Economic Growth • When economic growth occurs . . . • The production possibilities curve shifts outward.

  31. PP2 PP1 Economic Growth OUTPUT OF TRUCKS 0 OUTPUT OF TANKS

  32. What would have to occur for a country’s PPC to shift outward? • An increase in quality or quantity of a country’s • Land • Labor • Capital • Entrepreneurship • Technology

  33. What would have to occur for a country’s PPC to shift inward? • A decrease in quality or quantity of a country’s • Land • Labor • Capital • Entrepreneurship • Technology

  34. Neatly & Somewhat Small, write the job that you decided to take

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