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# Chapter 1 What is Economics About - PowerPoint PPT Presentation

Chapter 1 What is Economics About. Appendix A. Working with Diagrams. Types of Relationships between variables. Direct Positive Inverse Negative No Relationship Variables are independent. Two-Variable Diagram Representing an Inverse Relationship.

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Chapter 1 What is Economics About

### Appendix A

Working with Diagrams

• Direct

• Positive

• Inverse

• Negative

• No Relationship

• Variables are independent

Slope Variables

• Used to see how a variable changes in response to another variable changing

To calculate slope Variables

• Find two points on any straight line

• Direct relationship

• Positive

• Inverse relationship

• Negative

• No Relationship

• 0 or infinity

The 45 Line Variables

Homework Variables

• Chapter 1

• Questions 4, 5, 7, 8

• Chapter 1 Appendix

• Questions 6, 7, 9

### In-class exercise 1 Variables

Do we understand Chapter 1?

### Appendix B Variables

Should you major in Economics??

• Economics is all mathematics and statistics

• Economics is only about inflation, interest rates, unemployment, and other such things

• People become economists only if they want to “make money”

• Economics wasn’t very interesting in high school, so it isn’t going to be interesting now

• Economics is a lot like business, but business is more marketable

Chapter 2 Variables Economic Activities: Producing and Trading

Efficiency Variables

• Efficiency of Production is goal

• If a firm is producing the max possible given available resources and technology

Production Possibility Frontier Variables (PPF)

• Shows all possible combinations of goods for a particular economy at a particular point in time, given its resources and technology constraints

Where are we on the PPF? Variables

• Can we be on the PPF?

• Yes!

• efficient

• Can we be under the PPF?

• Yes!

• Inefficient

• Can we be over the PPF?

• NO

Constant Opportunity Costs

• STRAIGHT LINE

• DOWNWARD SLOPED (inverse relationship)

• 1 to 1 relationship (slope constant)

Production Possibilities Frontier Variables (Constant Opportunity Costs)

Production Possibilities Frontier Variables (Constant Opportunity Costs)

Second Type of PPF Variables

Changing Opportunity Costs

• BOWED OUT PPF

• Real world PPF

• Changing slope with every point

Production Possibilities Frontier Variables (Changing Opportunity Costs)

• Goes along with CHANGING OPPORTUNITY COSTS

• As more of a good is produced the opportunity cost to produce that good increases.

A Summary Statement about Increasing Opportunity Costs and a Production Possibilities Frontier That Is Bowed Outward (Concave Downward)

Economic Concepts illustrated by PPF Production Possibilities Frontier That Is Bowed Outward (Concave Downward)

• Scarcity

• Choice

• Opportunity Costs

• Law of Increasing Opportunity Costs