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Exercises. Circular Flow Diagram Production Possibilities Frontier. Directions. In any slides that contain ?’s or blanks. replace the ?’s with correct labels, fill in the blanks. Check your answers in the slides that follow. Learn from your errors, if any. _____ Diagram. A ?. ?. ?. ?.

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Presentation Transcript
exercises
Exercises
  • Circular Flow Diagram
  • Production Possibilities Frontier

Economics

directions
Directions
  • In any slides that contain ?’s or blanks.
    • replace the ?’s with correct labels,
    • fill in the blanks.
  • Check your answers in the slides that follow. Learn from your errors, if any.

Economics

diagram
_____ Diagram

A ?

?

?

?

?

I ?

II ?

?

?

B ?

?

?

Economics

circular flow diagram
Circular Flow Diagram

Markets forG&S

$revenue

$spending

G&S sold

G&S bought

Firms

Households

Resources used

Resources supplied

$costs

$income

Markets forResources

Economics

slide6
The _____ _____ _____

?

A

40

B

Good v

C

?

O

Economics

Good x

12

the production possibilities frontier ppf
The production possibilities frontier (PPF)

Qv

A

40

B

Good v

Connecting the combinations traces

out the production possibilities

frontier (PPF).

C

Qx

O

Economics

Good x

12

slide8
____, _____, & _____

Qv

PPF

A

U

40

?

B

Good v

?

E

?

I

C

Qx

O

Economics

Good x

12

inefficiency efficiency and scarcity
Inefficiency, efficiency, and scarcity

Qv

PPF

A

U

40

All combinations outside the PPF are unattainable,due to scarcity.

B

Good v

All combinations inside the PPF are inefficient.

E

All combinations on the PPF are efficient.

I

C

O

Qx

Economics

Good x

12

slide10
_____, _____, & _____ _____

Qv

A

40

?

B

?

?

C

Economics

O

Qx

?

12

choices tradeoffs opportunity cost
Choices, tradeoffs, & opportunity cost

2. But the economy cannot produce two combinations at the same time (tradeoffs).

1. The economy can choose to produce any combination inside or on the PPF (choices).

Qz

A

40

3. Suppose the economy is originally at A,…

Loss

B

4. …then it moves to B.

Gain

5. Then it moves from B to C.

6. The economy incurs opportunity costs.

(OC = loss/gain)

Loss

C

Economics

O

Qx

Gain

12

slide12
_____ _____

Qv

40

?

B

?

Economics

O

12

Qv

economic growth
Economic growth

Qv

The economy grows when

the PPF shifts outward.

40

PPF2

B

PPF1

Economics

O

12

Qx

slide14
_____ _____

Qv

40

?

?

12

O

Qx

Economics

technological advances
Technological advances

Qv

Technological advances occur when

the PPF rotates outward.

40

PPF2

PPF1

12

O

Qx

Economics

slide16
_____ _____ _____

Qv

A

T

40

B

PPF

C

O

12

Qx

Economics

gains from trade
Gains from trade

Gains from trade occur when the economy can consume

a combination outside the PPF.

Qz

A

T

40

B

PPF

C

O

12

Qx

Economics

slide18

See You!

Take Care!

Economics