101 lecture 3

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101 lecture 3

  1. 1. Microeconomics Lecture 3 Production Possibilities Frontier Exam 1 Review
  2. 2. Four Questions
  3. 3. What to make? How much to make? Who will make it? Who will consume it? Four Questions
  4. 4. How you slice the pie determines the size of the pie
  5. 5. Who decides? Government or Individuals
  6. 6. Planned Economy vs. Market Economy
  7. 7. Planned Economy vs. Market Economy Government Economy vs. Individual Economy
  8. 8. Adam Smith Market Economy Individual Economy Karl Marx Planned Economy Government Economy
  9. 9. Adam Smith TheWealth of Nations 1776
  10. 10. Invisible Hand
  11. 11. Invisible Hand individual self interest promotes wealth
  12. 12. Price System is a Knowledge System
  13. 13. Voluntary Exchange
  14. 14. buyer and seller both win Voluntary Exchange
  15. 15. Every Exchange
  16. 16. One Price Two values Every Exchange
  17. 17. What can government do?
  18. 18. Protect property rights What can government do?
  19. 19. Property Rights
  20. 20. the ability of an individual to own and control resources Property Rights
  21. 21. It’s cheaper to pay someone else than to do it myself
  22. 22. It’s cheaper to pay someone else than to do it myself Opportunity Cost is too high
  23. 23. Production Possibilities Frontier
  24. 24. iPhone Production Possibilities Frontier
  25. 25. iPad iPhone Production Possibilities Frontier
  26. 26. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
  27. 27. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
  28. 28. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
  29. 29. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
  30. 30. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier
  31. 31. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 0 600
  32. 32. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 0 600
  33. 33. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 0 600
  34. 34. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 520 200 0 600
  35. 35. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 520 200 0 600
  36. 36. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 520 200 400 400 0 600
  37. 37. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 520 200 400 400 0 600
  38. 38. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 520 200 400 400 250 500 0 600
  39. 39. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier Efficient Combinations 520 200 400 400 250 500 0 600
  40. 40. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier Efficient Combinations 520 200 400 400 250 500 0 600
  41. 41. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient 520 200 400 400 250 500 0 600
  42. 42. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient 520 200 400 400 250 500 0 600
  43. 43. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology 520 200 400 400 250 500 0 600
  44. 44. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone
  45. 45. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone
  46. 46. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone
  47. 47. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone New innovation helps both
  48. 48. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone New innovation helps both
  49. 49. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone New innovation helps both
  50. 50. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone New innovation helps both Now possible
  51. 51. Exam 1 review • Terms and Concepts • Formulas • Blog • Book • 25 multiple choice questions • No cell phones - bring calculator
  52. 52. Terms and Concepts • Scarcity • Choices • Tradeoffs • Rational • Incentives • Behavior • Utility • Margin • Markets • Circular-Flow Diagram • Production Possibilities Frontier • Macro vs. Micro • Positive vs. Normative • Absolute Advantage • Comparative Advantage
  53. 53. Formulas
  54. 54. Formulas Percentage Change % ∆ New - Old Old

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