ECONOMIC FACTS of LIFE

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ECONOMIC FACTS of LIFE
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ECONOMICS FACTS

• Resources
• Limited
• Wants
• Unlimited

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ECONOMICS FACTS

• Scarcity
• Not enough to be free
• Due to limited resources

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ECONOMIC RESOURCES

• Land
• Natural
• Labor
• Human
• Capital
• Man-made
• Entrepreneur
• Coordinator

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ECONOMIC RESOURCES INCOME

• Land
• Rent
• Labor
• Salaries/Benefits
• Capital
• Interest
• Entrepreneur
• Profits

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BACK TO BASICS

• Scarcity means
• Choices must be made
• Involves an.

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OPPORTUNITY COST

• Use of resource
• Sacrifice of other possible uses
• Best (one) other use
• Opportunity cost

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OPPORTUNITY COST CHOICES

• Guns vs Butter
• Security vs Social Programs
• Present vs Future
• Consumer vs Investment goods

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PRODUCTION POSSIBILITIES GRAPH

• Represents
• Alternative mixtures that can be produced
• Efficient use of existing resources

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PRODUCTION POSSIBILITIES GRAPH

• Illustrates
• Opportunity costs
• Increasing opportunity costs
• Unemployment (inside curve)
• Impossibility (outside curve)

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PRODUCTION POSSIBILITIES GRAPH

• Growth
• Requires more/better use of resources
• Outward shift of curve
• Necessary to maintain/improve lifestyle

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ECONOMIC QUESTIONS ALL FACE

• What?
• To produce
• Not to produce (opportunity cost)
• How?
• What mix of resources
• Who?
• Will get good/services (G/S) produced
• Will not get

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ECONOMIC SYSTEMS

• Market System/Signal
• aka Pricing system, invisible hand, dollar
  vote, capitalism, free enterprise
• Government Directive
• aka Central planning, communism, command system

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MARKET SIGNALS

• Pricing tells producers
• What consumers want
• How cheapest resource mixture
• Who can afford to purchase

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GOVERNMENT DIRECTIVES

• Government directs producers
• What to produce (via quotas)
• How to produce
• Who will get via arbitrary pricing
• Necessity affordable
• Luxury expensive

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REAL WORLD

• Mixed Economy due to
• Market failure pollution, poverty
• Government failure USSR

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ECONOMIC STUDY

• Ends vs Means
• Means alternatives
• Economists provide
• Ends choice of alternative
• Policy makers decide

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ECONOMIC STUDY

• Macro vs Micro
• Macro entire economy
• Micro individual unit

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ECONOMIC STUDY

• Theory vs Reality
• Theory
• Study principles on which
• Reality operates
• Requires use of models

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GRAPHIC ANALYSIS

• Purpose
• Illustrate numerical data
• Movement along curve
• Change within data
• Shift of curve
• Change of data

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SLOPE

• Slope
• ? rise ? run
• ? change in

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SLOPES SIGNIFICANCE

• Negative slope
• Inverse relationship
• Downsloping curve
• Positive slope
• Direct relationship
• Upsloping curve

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