1. Copyright © 2006 Thomson Learning 2 Thinking Like an Economist

2. Figure 1 The Circular Flow Copyright © 2004 South-Western Spending Goods and services bought Revenue Goods and services sold Labour, land, and capital Income = Flow of inputs and outputs = Flow of euros Factors of production Wages, rent, and profit FIRMS Produce and sell goods and services Hire and use factors of production Buy and consume goods and services Own and sell factors of production HOUSEHOLDS Households sell Firms buy MARKETS FOR FACTORS OF PRODUCTION Firms sell Households buy MARKETS FOR GOODS AND SERVICES

3. Figure 2 The Production Possibilities Frontier Copyright©2003 Southwestern/Thomson Learning Production possibilities frontier A B C Quantity of Cars Produced 2,200 600 1,000 300 0 700 2,000 3,000 1,000 Quantity of Computers Produced D

4. Figure 3 A Shift in the Production Possibilities Frontier Copyright © 2004 South-Western E Quantity of Cars Produced 2,000 700 2,100 750 0 4,000 3,000 1,000 Quantity of Computers Produced A

5. Table 2 Ten Propositions about Which Most Economists Agree Copyright © 2004 South-Western