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Chapter 1 What is Economics AboutPowerPoint Presentation

Chapter 1 What is Economics About

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### Appendix A

### In-class exercise 1 Variables

### Appendix B Variables

Chapter 1 What is Economics About

Working with Diagrams

Types of Relationships between variables

- Direct
- Positive

- Inverse
- Negative

- No Relationship
- Variables are independent

Two-Variable Diagram Representing an Inverse Relationship

Two-Variable Diagram Representing a Direct Relationship

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

What sign do you expect the slope to have? Variables

- Direct relationship
- Positive

- Inverse relationship
- Negative

- No Relationship
- 0 or infinity

Calculating Slopes Variables

Calculating Slopes Variables

The 45 Line Variables

Homework Variables

- Chapter 1
- Questions 4, 5, 7, 8

- Chapter 1 Appendix
- Questions 6, 7, 9

Do we understand Chapter 1?

Should you major in Economics??

Five myths about economics and an economics major Variables

- 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

Production Possibilities Frontier Variables for Grades

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

Two types of Production Possibility Frontiers Variables

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)

Law of Increasing Opportunity Costs 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

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