Lesson 3

oppositemincedΔιαχείριση

28 Οκτ 2013 (πριν από 3 χρόνια και 11 μήνες)

78 εμφανίσεις


AP Macroeconomics

Key Assumptions in Economics,
Scarcity, Opportunity Cost and
the Production Possibilities
Curve

Key Assumptions in
Economics


People are rationally self
-
interested



They seek to maximize their utility (happy
points)


People generally make decisions at the
margin


They weigh the marginal benefit against the
marginal cost of a decision


Ceteris Paribus


Economists hold factors constant, NO “what ifs”;
“but”; or “what abouts”.

Basic Economic Vocabulary


Economics


The study of choices people make to
satisfy their needs and wants


Microeconomics


The study of how individuals and firms
deal with scarcity


Macroeconomics


The study of how society as a whole deals
with scarcity

Basic Economic Vocabulary


Needs


Necessities for survival


Wants


Goods and services consumed beyond
what is necessary for survival

Basic Economic Vocabulary


Goods


Physical objects that can be purchased


Services


Actions or activities performed for a fee


Consumers


People who purchase goods and services


Producers


People who supply goods and services


Resources a.k.a. The Factors of
Production


These MUST be present to produce!


Economists classify resources into 4 categories

1.
Land


Natural resources


The payment for Land is RENT

2.
Labor


Human resources


The payment for Labor is WAGES

3.
Capital (a product of Investment)


Tools, machines, factories


The payment for Capital is INTEREST

4.
Entrepreneurship


The special ability of risk
-
takers to combine land,


labor and capital in new ways in order to make profit


The payment for Entrepreneurship is PROFIT

The Fundamental Problem of
Economics: Scarcity


People have unlimited wants but the
resources to satisfy those wants are scarce.


Therefore, we must make choices about
how to use our scarce resources. We face
trade
-
offs when it comes to using available
resources.


Examples of the world?

Opportunity Cost


Once a decision has been made, an
opportunity cost is incurred.


Opportunity cost is the next best alternative
use for a resource. (choice)


Example? Student view?; parent view?;
employee view? Business mgr view?


No matter what we do with our time or
resources, we always incur opportunity
cost. TINSTAAFL.

TINSTAAFL

There is no such


thing as a free


lunch.

TINSTAAFL

Everything has a
cost.

TINSTAAFL Illustrated: The PPC


The PPC = The Production Possibilities Curve


The PPC = a graph showing all of the
possible combinations of output for an
economy fully employing all of its
resources in producing 2 goods.

TINSTAAFL Illustrated: The PPC

Graph a new PPC

2008 question 3
FRQ……….collaborative quiz.


https://www.youtube.com/watch
?v=SJQ56vJoy3Y&list=PL8C243C1
F4555FDC7



Question 3

6 points

(1 + 2 + 2 + 1)

(a)

1 point:

• One point is earned for stating that the opportunity cost of a bicycle in Artland is
600/300 =

2 hats.

(b) 2 points:

• One point is earned for stating that Rayland will import bicycles.

• One point is earned for any one or more of the following explanations:

Rayland has a comparative advantage in hats.

Rayland has a comparative disadvantage in bicycles.

Rayland has a lower opportunity cost in hats or higher opportunity cost in
bicycles.

Artland has a comparative advantage in bicycles.

Artland has a comparative disadvantage in hats.

Artland has a lower opportunity cost in bicycles or a higher opportunity cost in
hats.

(c) 2 points:

• One point is earned for stating that it is advantageous for Artland.

• One point is earned for stating that it is NOT advantageous for Rayland.

(d)

1 point:

• One point is earned for stating that Rayland has a comparative advantage in
producing