Economics Basic Problem in Economics - economics – choices on scarce resources >>> fulfill needs & wants *macro-*micro- wants v. needs

Capital – combo = increase value Entrepreneurship –s–start new business –i–intro new products –i–improve / new business techniques iinitiative & risks = $ profit $ *goods & services*

Scarcity – issues… shortage??

unavoidable (scarcity) unavoidable (scarcity) – time!!

opportunity costs - only next best  impacts ALL!

What is the opportunity cost of going to college?

$$ in billions [fixed: resources/time] various combo of Gs & Ss…economy can choose to produce

economy- “theory” –d–display --- consumer reactions / behavior  p price & purchases  words / graphs / equations –l–limitations… bbasic factors $$: item & alternative income of avg. buyer models effective?

belief {system of} held by group of economists –f–facts / data iinfluenced: opinions / beliefs / gov’t ppolicies effect political practices key: gov’t involvement w/ economy –v–values- beliefs or characteristics considered important eeconomists do NOT judge results --- only what they will be

14 of 33 The Scope of Economics Examples of microeconomic and macroeconomic concerns ProductionPricesIncomeEmployment MicroeconomicsProduction/Output in Individual Industries and Businesses How much steel How many offices How many cars Price of Individual Goods and Services Price of medical care Price of gasoline Food prices Apartment rents Distribution of Income and Wealth Wages in the auto industry Minimum wages Executive salaries Poverty Employment by Individual Businesses & Industries Jobs in the steel industry Number of employees in a firm MacroeconomicsNational Production/Output Total Industrial Output Gross Domestic Product Growth of Output Aggregate Price Level Consumer prices Producer Prices Rate of Inflation National Income Total wages and salaries Total corporate profits Employment and Unemployment in the Economy Total number of jobs Unemployment rate

16 of 33 Appendix: How to Read and Understand Graphs

17 of 40 The Production Possibility Frontier The production possibility frontier curve has a negative slope, which indicates a trade-off between producing one good or another.

18 of 40 The Production Possibility Frontier Points inside of the curve are inefficient. At point H, resources are either unemployed, or are used inefficiently.

19 of 40 The Production Possibility Frontier Point F is desirable because it yields more of both goods, but it is not attainable given the amount of resources available in the economy.

20 of 40 The Production Possibility Frontier Point C is one of the possible combinations of goods produced when resources are fully and efficiently employed.

21 of 40 The Production Possibility Frontier A move along the curve illustrates the concept of opportunity cost. From point D, an increase the production of capital goods requires a decrease in the amount of consumer goods.

22 of 40 The Law of Increasing Opportunity Cost The slope of the ppf curve is also called the marginal rate of transformation (MRT). As we increase the production of one good, we sacrifice progressively more of the other. The negative slope of the ppf curve reflects the law of increasing opportunity cost. As we increase the production of one good, we sacrifice progressively more of the other.