1. Macro Chapter 1 Presentation 3

2. Quick Check #1 The idea that the limited amount of resources are never sufficient to satisfy people’s virtually unlimited economic wants is known as ____________ Scarcity

3. #2 Define Opportunity Cost To obtain one more of one thing, society must forgo the opportunity of getting the next best thing

4. Quick Check #3 The pleasure, happiness or satisfaction obtained from consuming a good or service is known as ____________ Utility

5. Quick Check #4 Define Marginal “extra,” “additional,” one more, or “change in”

6. Unemployment and Underemployment Represented by points inside the PPC Not all resources are being utilized ***underemployment ex- a lawyer working in retail

7. Shifts in the PPC 1. Increase in resource supplies- expanded potential output (ie new oil wells) 2. Advances in technology- Ex) computers increase speed and efficiency

8. Economic Growth An increase in total output

9. Production Possibilities Model 15 10 5 0 1 2 3 a b c d e MB = MC MC MB Optimal Allocation of Resources Quantity of Pizza Marginal Benefit & Marginal Cost

10. Budget Line (Constraint) The schedule or chart that shows various combinations of two products a consumer can buy with a given amount of money

11. Budget Line 65432106543210 0 2 4 6 8 10 12 DVDs $20 Books $10 12 10 8 6 4 2 0 2 4 6 8 10 12 14 $120 Budget Income = $120 P dvd = $20 = 6 Income = $120 P b = $10 = 12 Attainable Unattainable Quantity of Books Quantity of DVDs

12. Positive Economics (“What is”) Focuses on facts and cause-and-effect relationships. Avoids value judgments and tries to establish scientific statements about economic behavior and what the economy is actually like. (Positive about it) Ex- The unemployment rate in France is higher than in the US

13. Normative Economics (“What ought to be”) Incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal Ex- France should undertake policies to make its labor market more flexible to reduce unemployment

14. Factors of Production (Inputs) 1. Land 2. Labor 3. Capital 4. Entrepreneurial Ability

15. Land Includes all natural resources (“gifts of nature”) used in the production process, such as arable land, forests, mineral and oil deposits, and water resources

16. Labor The physical and mental talents of individuals used in producing goods and services

17. Capital All manufactured aids used in producing consumer goods and services. Ex- factory, storage, transportation, and distribution facilities, tools and machinery

18. Entrepreneurial Ability Combines the resources of land, labor and capital to produce a good or service Innovator of new products Bears the financial risk of business

19. Present Choices & Future Possibilities Goods for the Present (consumer) Goods for the Future (Capital) Goods for the Present (consumer) PresentvilleFutureville P F Current Curve Current Curve Future Curve Future Curve Compare Two Hypothetical Economies G 1.2