Microeconomics Production Possibilities Frontier Lecture
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This document covers key concepts from a lecture on production possibilities frontiers and microeconomics. It introduces scarcity, opportunity cost, and the production possibilities frontier curve. It shows how innovation can shift the frontier curve outward, allowing for increased production possibilities. Comparative advantage is discussed using an example of trade between two individuals, Gale and Ali.
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Microeconomics Production Possibilities Frontier Lecture
- 1. Microeconomics ! Lecture 2 ! Production Possibilities Frontier
- 2. 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
- 3. Yabut
- 8. Fell Pushed Jumped ! Result the same
- 10. Utopia vs. Reality Reality always loses
- 11. Utopia vs. Reality Reality always loses Realistic Alternatives
- 13. Positive What is Normative
- 14. Positive What is Fact Normative
- 15. Positive What is Fact Normative What ought to be
- 16. Positive What is Fact Normative What ought to be Values
- 17. Facts Values
- 18. Facts True or False Values
- 19. Facts True or False Values Good or Bad
- 20. Four Questions
- 21. Four Questions What to make? How much to make? Who will make it? Who will consume it?
- 22. How you slice the pie ! determines the size of the pie
- 23. Who decides? Government or Individuals
- 24. Planned Economy vs. Market Economy
- 25. Planned Economy vs. Market Economy Government Economy vs. Individual Economy
- 26. Adam Smith ! Market Economy Individual Economy Karl Marx ! Planned Economy Government Economy
- 27. Adam Smith The Wealth of Nations 1776
- 28. Invisible Hand
- 29. Invisible Hand individual self interest promotes wealth
- 30. Price System is a Knowledge System
- 32. Voluntary Exchange buyer and seller both win
- 33. Every Exchange
- 34. Every Exchange One Price Two values
- 35. SAR 100 70
- 36. Buyer SAR Value 100 70
- 37. Buyer SAR Value 100 70
- 38. Buyer Value Seller SAR Value 100 70
- 39. Buyer Value Seller SAR Value 100 70
- 40. Buyer Value Seller Value Price SAR Range? 100 70
- 41. Buyer Value Seller Value Price SAR Range? 100 70
- 42. Buyer Value Seller Value Price SAR Range? 100 70
- 43. Buyer Value Seller Value Price SAR Range? 100 70
- 44. Buyer Value Seller Value Price SAR Range? 100 70 What if the price was 120?
- 45. Buyer Value Seller Value Price SAR Range? 100 70 What if the price was 120? What if the price was 60?
- 46. Buyer Value Seller Value Price SAR Range? 100 70
- 47. Buyer Value Seller Value Price SAR Range? 100 70
- 48. Buyer Value Seller Value Price SAR Range? 100 70
- 49. Buyer Value Seller Value Price SAR Range? 100 70
- 50. Buyer Value Price Range? Seller Value SAR 100 70
- 51. What can government do?
- 52. What can government do? Protect property rights
- 53. Property Rights
- 54. Property Rights the ability of an individual to own and control resources
- 55. It’s cheaper to pay someone else than to do it myself
- 56. It’s cheaper to pay someone else than to do it myself Opportunity Cost is too high
- 57. Opportunity Cost
- 58. Opportunity Cost The highest valued alternative
- 60. iPhone Production Possibilities Frontier
- 61. iPad iPhone Production Possibilities Frontier
- 62. 1000 800 600 400 200 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
- 63. 1000 800 600 400 200 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
- 64. 1000 800 600 400 200 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
- 65. 1000 800 600 400 200 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
- 66. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier
- 67. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 0 600
- 68. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 0 600
- 69. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 0 600
- 70. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 520 200 0 600
- 71. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 520 200 0 600
- 72. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 520 200 400 400 0 600
- 73. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 520 200 400 400 0 600
- 74. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier 520 200 400 400 250 500 0 600
- 75. 1000 800 600 400 200 0 600 0 520 200 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations 400 400 250 500 0 600
- 76. 1000 800 600 400 200 0 600 0 520 200 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations 400 400 250 500 0 600
- 77. 1000 800 600 400 200 0 600 0 520 200 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient 400 400 250 500 0 600
- 78. 1000 800 600 400 200 0 600 0 520 200 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient 400 400 250 500 0 600
- 79. 1000 800 600 400 200 0 600 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology 520 200 400 400 250 500 0 600
- 80. 1000 800 600 400 200 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone
- 81. 1000 800 600 400 200 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone
- 82. 1000 800 600 400 200 0 0 200 400 600 800 1000 iPad iPhone Production Possibilities Frontier Efficient Combinations Inefficient Impossible with current technology New innovation helps iPhone
- 83. 1000 800 600 400 200 0 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
- 84. 1000 800 600 400 200 0 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
- 85. 1000 800 600 400 200 0 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
- 86. 1000 800 600 400 200 0 Now possible 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
- 90. How many marshmallows would you have in 24 hours if you started with one and they were doubled every 15 minutes?
- 91. 296
- 92. 296
- 93. 296
- 94. 296 The number of marshmallows would fill 1,200 earths
- 95. 296 The number of marshmallows would fill 1,200 earths
- 96. Slope Percentage Change Relationships Cause and Effect Areas
- 97. Formulas
- 98. Formulas Percentage Change % Δ New - Old Old
- 99. Notation % Percent Change ! % Percentage Change
- 100. % Percentage Change New - Old Old
- 101. % Percentage Change New - Old Old 7 - 5 5
- 102. % Percentage Change New - Old Old 7 - 5 = 5
- 103. % Percentage Change New - Old Old 7 - 5 = 5 2 5
- 104. % Percentage Change New - Old Old 7 - 5 = = 5 2 5
- 105. % Percentage Change New - Old Old 7 - 5 = = .4 5 2 5
- 106. % Percentage Change New - Old Old 7 - 5 = = .4 = 5 2 5
- 107. % Percentage Change New - Old Old 7 - 5 = = .4 = 40% 5 2 5
- 108. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old
- 109. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old 9 - 6 6
- 110. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old 9 - 6 = 6
- 111. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old 9 - 6 = 6 3 6
- 112. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old 9 - 6 = = 6 3 6
- 113. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old 9 - 6 = = .5 6 3 6
- 114. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old 9 - 6 = = .5 = 6 3 6
- 115. Last year the price was 6. This year the price is 9. What is the percentage change? ! New - Old Old 9 - 6 = = .5 = 50% 6 3 6
- 125. X Y
- 126. X Y Quantity Price
- 127. X Y Quantity Price Q $
- 128. Q $
- 129. Q $
- 130. Q $
- 131. Q $
- 132. Q $
- 133. Q $
- 135. Why are some rich and others poor?
- 138. David Ricardo (1772 - 1823) ! Principles of Political Economy and Taxation ! Comparative Advantage
- 139. Absolute Advantage ! Produce more with the same resources ! Comparative Advantage ! Produce at a lower opportunity cost
- 140. The basis for trade is comparative advantage, not absolute advantage.
- 142. No Trade 2 Hooks and 2 Fish 10 Hours - 5 Hours per Fish Gale Ali Total Hours Make a Hook 3 2 5 Catch a Fish 4 1 5 Total Hours 7 3 10
- 143. No Trade 2 Hooks and 2 Fish 10 Hours - 5 Hours per Fish Gale Ali Total Hours Make a Hook 3 3/4 Fish 2 2 Fish 5 Catch a Fish 4 1 1/3 Hook 1 1/2 Hook 5 Total Hours 7 3 10
- 144. With Trade 2 Hooks and 2 Fish 8 Hours - 4 Hours Per Fish Gale Ali Total Hours Make a Hook 2 hooks 6 hours 6 Catch a Fish 2 fish 2 hours 2 Total Hours 6 2 8
- 145. Markets ! Where Buyers and Sellers Trade
- 146. Households Individuals in a home Sell Factors of Production Buy Goods & Services
- 147. Firms Buy Factors of Production Sell Goods & Services
- 148. Product Markets Markets for finished goods and services ! - Stores -
- 149. Factor Markets Markets for goods and services used to make products
- 151. ! Households
- 152. ! Households ! Firms
- 153. Labor Capital Natural Resources Entrepreneurs ! Households ! Firms
- 154. Labor Capital Natural Resources Entrepreneurs Goods & Services ! Households ! Firms
- 155. Labor Capital Natural Resources Entrepreneurs Spending Wages & Payments for Factors Goods & Services ! Households ! Firms
- 156. Labor Capital Natural Resources Entrepreneurs Spending Wages & Payments for Factors Goods & Services ! Households ! Firms Product Markets
- 157. Labor Capital Natural Resources Entrepreneurs Spending Wages & Payments for Factors Goods & Services ! Households ! Firms Factor Markets Product Markets
- 158. The Market System ! Trust Private Property Rights Rule of Law