1 Limits Alternatives and Choices Mc GrawHillIrwin Copyright

Introduction • LO 1 Economics defined: • Economic wants exceed productive capacity. • Use

The Economic Perspective • Key features: • • • LO 1 Scarcity and choice

Scarcity and Choice • • • Resources are scarce Choices must be made Opportunity

Purposeful Behavior • • LO 1 Rational self-interest Utility Desired outcomes Selfless good deed

Marginal Analysis LO 1 • Compare marginal benefit and marginal cost • Marginal means

Theories, Principles, and Models • LO 2 Economic principles and theories • • Generalizations,

Microeconomics and Macroeconomics • Microeconomics • • Macroeconomics • • LO 3 Decision making

Positive and Normative Economics • Positive economics • • Normative economics • LO 3

• Society’s Economizing Problem Scarce resources – inputs used to produce other goods

Society’s Economizing Problem • Entrepreneurial ability • • • LO 4 Takes initiative Decision

• • Production Possibilities Model Shows maximum combinations of 2 goods that can

Production Possibilities Table Production Alternatives Type of Product Pizzas A B C D E

A Growing Economy • Economic Growth • • • LO 6 More resources Improved

International Trade • • LO 6 Specialization Increased production possibilities

Slides: 15

Download presentation

Introduction • LO 1 Economics defined: • Economic wants exceed productive capacity. • Use resources efficiently to maximize fulfillment of unlimited wants.

The Economic Perspective • Key features: • • • LO 1 Scarcity and choice Purposeful Behavior Marginal Analysis

Scarcity and Choice • • • Resources are scarce Choices must be made Opportunity cost • LO 1 There’s no free lunch

Purposeful Behavior • • LO 1 Rational self-interest Utility Desired outcomes Selfless good deed

Marginal Analysis LO 1 • Compare marginal benefit and marginal cost • Marginal means “extra”

Theories, Principles, and Models • LO 2 Economic principles and theories • • Generalizations, so imprecise • Statements of economic behavior supported by facts Ceteris Paribus: Other-thingsequal assumption

Microeconomics and Macroeconomics • Microeconomics • • Macroeconomics • • LO 3 Decision making by individual units Aggregate, total Economic speak

Positive and Normative Economics • Positive economics • • Normative economics • LO 3 Deals with economic facts Subjective perspective of economy

• Society’s Economizing Problem Scarce resources – inputs used to produce other goods and services • • • Land – natural resources Labor – most workers Capital – manufactured inputs • • LO 4 Not money Investment – spending on production & accumulation of capital

Society’s Economizing Problem • Entrepreneurial ability • • • LO 4 Takes initiative Decision maker Innovator Takes risk Key to economic growth

• • Production Possibilities Model Shows maximum combinations of 2 goods that can be produced when the economy is efficient. Assumptions: • • LO 5 Full employment Fixed resources Fixed technology Two goods

Production Possibilities Table Production Alternatives Type of Product Pizzas A B C D E 0 1 2 3 4 10 9 7 4 0 (in hundred thousands) Industrial Robots (in thousands) Plot Points to Create Graph… LO 5

A Growing Economy • Economic Growth • • • LO 6 More resources Improved resource quality Technological advances

International Trade • • LO 6 Specialization Increased production possibilities