Transcript Chapter 1

Chapter One Homework
• Numbers 4, 6, and 8
Appendix for
Chapter 1
Graphing and
Algebra Review
Figure 1A.4 The Effect of a Change in
Intercept on the Curve
Figure 1A.5 The Effect of a Change in
Slope on the Curve
Figure 1A.6
Lines with Zero and Infinite Slopes
Figure 1A.7
Graphing a Nonlinear Relationship
Slope of a curve
• Take the first derivative of the equation
• OR….

Choose two points along the curve

Draw a tangent line between them

Find the slope of the tangent line

This will APPROXIMATE the slope
Appendix 1 Homework
• Numbers 2, 6, 8, and 10
Chapter 2
Efficiency and
Allocation in the
Global Economy
Introduction
• Because of scarcity we cannot produce
everything.

We have to choose what to produce.

Security or education ?
• How are those choices made?
• What are the consequences of our
choices?
Factors of Production
• Four basic types of resources, or inputs.

Land, labor, capital, and entrepreneurship
• Together, these are known as factors of
production.

What and how a nation produces is
determined by its factor endowment.
• How much of each “we” have.
Land
• Natural resource used for agriculture,
housing, industrial production, and
recreation.

Also includes other natural resources:
•
•
•
•
•
Water
Gas
Oil Deposits
Minerals
Forests
Labor
• Physical and mental talents available to
produce goods and services.

Labor Force—the number of people over the
age of 16 that are willing and able to work.

Human Capital—the knowledge, experience,
and innate ability of individuals.
Capital
• Buildings and equipment that can be used to
produce other goods and services.

Also called capital goods or physical capital

Consumption goods cannot be used to produce other
goods and services.
• Financial capital is the money that firms spend
on buildings and equipment.
Entrepreneurship
• Entrepreneurs organize, operate, and
assume the risk of business ventures.

The people with the big ideas
Production Technology
• The way in which an economy employs the
factors of production.

Production function
• Q = f(K, L)
The Production Possibilities Frontier (PPF)
• Graphical representation of the
combinations of goods and services
that an economy can produce in a given
time period.
Gross Domestic Product
• Market value of all final goods and services
produced in a given period in an economy.
• GDP per capita measures output
per person.


GDP divided by the population
Used when comparing economies of different
sizes
Figure 2.1(a) The Production Possibilities
Frontier (PPF)
Figure 2.1(b) The Production Possibilities
Frontier (PPF)
PPF assumptions
• Fixed level of resources
• All resources fully employed
• Constant level of technology and human
capital
• What is another name for the slope of the
PPF?

Opportunity cost
Where can we be on the PPF??
• Can we be

On the curve??
• Yes  efficient

Under the curve??
• Yes  inefficient

Over the curve??
• No  not enough resources