Eco 202 ch 25 production and costs

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Eco 202 ch 25 production and costs

  1. 1. Chapter 25Production and Growth
  2. 2. Marshmallows
  3. 3. How many marshmallows wouldyou have in 24 hours if you started with oneand they were doubled every 15 minutes?
  4. 4. 96 279,228,162,514,264,300,000,000,000,000 x 1,200
  5. 5. Productivity Outputdivided by Input
  6. 6. How do we go from this... to this?
  7. 7. 1800 2010 Change Population one billion seven billion 7x Life Expectancy 26 years 66 years 40 +GDP Per Capita Per Day $3 $30 10 x
  8. 8. GDP Per CapitaGDP: $70,000,000,000,000Population: 7,000,000,000GDP Per Capita: $10,000 Source: https://www.google.com.sa/publicdata/explore? ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&tdim=true&dl=en&hl=en&q=world%20gdp#! ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&ifdim=regi on&tdim=true&hl=en_US&dl=en&ind=false
  9. 9. Rates andCompounding Linear versusExponential
  10. 10. Linear versus Exponential Adding versus Compounding64 ^ 6456484032 322416 + 16 12 8 10 8 8 6 0 2 4 1 2 3 4 5 6
  11. 11. Rule of 70s Years to Double 70 divided by the rate of growth 70Rate of Growth
  12. 12. Years to Size inRate Double 70 years? 1% 70 ÷ 1 = 70 2x 2% 70 ÷ 2 = 35 4x 3% 70 ÷ 3 = 23.3 8x 4% 70 ÷ 4 = 17.5 16 x 5% 70 ÷ 5 = 14 32 x
  13. 13. Why doStandards of Living differ? One word Productivity
  14. 14. Productivity Better atmaking stuff
  15. 15. What is Wealth?What people want
  16. 16. What is Capital?Anything that helps you create wealth
  17. 17. Five Types of Capital Cultural Human Physical Intellectual Financial
  18. 18. CulturalCapital
  19. 19. Worldview Political LegalEconomic
  20. 20. Cultural Capital How peopleview and treat other people Expectations
  21. 21. Cultural Capital Property Rights Rule of Law Political StabilityNo peace ... No prosperity
  22. 22. Free to Trade
  23. 23. HumanCapital
  24. 24. I look for three things in hiring people. The first is personal integrity, the second isintelligence, and the third is a high energy level. - Warren Buffett, CEO, Berkshire Hathaway But of you don’t have thefirst, the other two will kill you.
  25. 25. Trust IntegrityCompetence
  26. 26. Human Capital TrustKnowledge and SkillsHealth and NutritionSocial Relationships
  27. 27. Health & Nutrition
  28. 28. Physical Capital Two types ToolsNatural ResourcesWater, Oil, Minerals
  29. 29. Physical CapitalTools we use to make stuff Natural Resources Renewable Non-renewable
  30. 30. Intellectual Capital TechnologyHow the world works How we makesmart things and make things smart
  31. 31. Research and Development Patent System20 Year Monopoly on your idea
  32. 32. Intellectual Capital Human Capital
  33. 33. Financial Capital Money Allows us to storelabor and shift time
  34. 34. Spend or Save? Savings versusConsumption
  35. 35. Three Steps Save instead of consumeInvestment in new capital Increase productivity
  36. 36. Capital AllocationRight capital at the right time
  37. 37. Innovation - Productivity
  38. 38. Continuous Innovation
  39. 39. Education Each year in school adds 10 percent to incomeInvest versus consume
  40. 40. Population Growth More people Smaller slices GDPGDP per capitaGrow the pie faster than population
  41. 41. Population Growth A smaller slice of a larger pie is bigger than a larger slice of a smaller pie
  42. 42. U.S. Farmers1900 - 40 percent
  43. 43. U.S. Farmers2012 - 2 percent
  44. 44. Productivity Growth More people More ideas More innovation More wealth

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