101 lecture 3

1. Microeconomics Lecture 3 Production Possibilities Frontier Exam 1 Review

2. Four Questions

3. What to make? How much to make? Who will make it? Who will consume it? Four Questions

4. How you slice the pie determines the size of the pie

5. Who decides? Government or Individuals

6. Planned Economy vs. Market Economy

7. Planned Economy vs. Market Economy Government Economy vs. Individual Economy

8. Adam Smith Market Economy Individual Economy Karl Marx Planned Economy Government Economy

9. Adam Smith TheWealth of Nations 1776

10. Invisible Hand

11. Invisible Hand individual self interest promotes wealth

12. Price System is a Knowledge System

13. Voluntary Exchange

14. buyer and seller both win Voluntary Exchange

15. Every Exchange

16. One Price Two values Every Exchange

17. What can government do?

18. Protect property rights What can government do?

19. Property Rights

20. the ability of an individual to own and control resources Property Rights

21. It’s cheaper to pay someone else than to do it myself

22. It’s cheaper to pay someone else than to do it myself Opportunity Cost is too high

23. Production Possibilities Frontier

24. iPhone Production Possibilities Frontier

25. iPad iPhone Production Possibilities Frontier

26. 0 200 400 600 800 1000 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier

30. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier

31. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 0 600

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. 0 200 400 600 800 1000 0 200 400 600 800 1000 600 0 iPad iPhone Production Possibilities Frontier 520 200 0 600

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Exam 1 review • Terms and Concepts • Formulas • Blog • Book • 25 multiple choice questions • No cell phones - bring calculator

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. Formulas

54. Formulas Percentage Change % ∆ New - Old Old

101 lecture 3

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101 lecture 3