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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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appendix a

Appendix A

Working with Diagrams

types of relationships between variables
Types of Relationships between variables
  • Direct
    • Positive
  • Inverse
    • Negative
  • No Relationship
    • Variables are independent
slope
Slope
  • Used to see how a variable changes in response to another variable changing
to calculate slope
To calculate slope
  • Find two points on any straight line
what sign do you expect the slope to have
What sign do you expect the slope to have?
  • Direct relationship
    • Positive
  • Inverse relationship
    • Negative
  • No Relationship
    • 0 or infinity
homework
Homework
  • Chapter 1
    • Questions 4, 5, 7, 8
  • Chapter 1 Appendix
    • Questions 6, 7, 9
in class exercise 1

In-class exercise 1

Do we understand Chapter 1?

appendix b

Appendix B

Should you major in Economics??

five myths about economics and an economics major
Five myths about economics and an economics major
  • 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
efficiency
Efficiency
  • Efficiency of Production is goal
  • If a firm is producing the max possible given available resources and technology
production possibility frontier ppf
Production Possibility Frontier(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
Where are we on the PPF?
  • 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
Two types of Production Possibility Frontiers

Constant Opportunity Costs

  • STRAIGHT LINE
  • DOWNWARD SLOPED (inverse relationship)
  • 1 to 1 relationship (slope constant)
second type of ppf
Second Type of PPF

Changing Opportunity Costs

  • BOWED OUT PPF
  • Real world PPF
  • Changing slope with every point
law of increasing opportunity costs
Law of Increasing Opportunity Costs
  • Goes along with CHANGING OPPORTUNITY COSTS
  • As more of a good is produced the opportunity cost to produce that good increases.
slide30
A Summary Statement about Increasing Opportunity Costs and a Production Possibilities Frontier That Is Bowed Outward (Concave Downward)
economic concepts illustrated by ppf
Economic Concepts illustrated by PPF
  • Scarcity
  • Choice
  • Opportunity Costs
  • Law of Increasing Opportunity Costs
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