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Basic Models SFLS
- 1. First Basic Modelsof the Economy
- 2. FIRST BASIC MODELSOF THE ECONOMY 3.) Production Possibilities Curve 1.) Circular Flow Model 2.) Business Cycle Model
- 3. Households Firms G & S markets Demandstuff Supply stuff pay money earn income F & P markets Demand stuff Supply stuff earn income pay money Government transferstaxes taxessubsidies Demand stuff Demand stuff
- 6. 1.) Circular Flow.- a basic way of understanding how different parts of the economic system fit together. FIRST BASIC MODELS OF THE ECONOMY
- 7. 1.) Circular Flow. -Consumers in the Economy- Households FIRST BASIC MODELS OF THE ECONOMY
- 8.
- 9. 1.) Circular Flow. -Households - Producers in the economy.- Firms FIRST BASIC MODELS OF THE ECONOMY
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- 11. 1.) Circular Flow. -Households - Firms - Where consumers go to buy things from producers. - Good and services Market FIRST BASIC MODELS OF THE ECONOMY
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- 13. Households Firms G & S markets Demandstuff Supply stuff pay money receive money
- 14. 1.) Circular Flow. -Households - Firms - Good and services Market - Where producers come to buy things from consumers. - Factors of Production Market FIRST BASIC MODELS OF THE ECONOMY
- 15. Households Firms G & S markets F& P markets
- 16. Households Firms G & S markets F& P markets Demand stuff Supply stuff earn income pay money
- 17. Households Firms G & S markets Demandstuff Supply stuff pay money earn income F & P markets Demand stuff Supply stuff earn income pay money
- 18. 1.) Circular Flow. -Households - Firms - Good and services Market - Factors of Production Market - Collects taxes, buys public goods and gives out transfers. - Government FIRST BASIC MODELS OF THE ECONOMY
- 19. Households Firms G & S markets F& P marketsGovernment
- 20. Households Firms G & S markets F& P marketsGovernment transferstaxes taxessubsidies Demand stuff Demand stuff
- 21. Households Firms G & S markets Demandstuff Supply stuff pay money earn income F & P markets Demand stuff Supply stuff earn income pay money Government transferstaxes taxessubsidies Demand stuff Demand stuff
- 22. FIRST BASIC MODELSOF THE ECONOMY 3.) Production Possibilities Curve 1.) Circular Flow Model 2.) Business Cycle Model
- 23. 2.) Business Cycle- Looking at how the economy grows over time. FIRST BASIC MODELS OF THE ECONOMY
- 24. - Looking atthings today. Now they are in the current time. Short Run Growth 2.) Business Cycle FIRST BASIC MODELS OF THE ECONOMY ……….
- 25. Time Short Run Econ Growth - Lookingat things today. Now they are in the current time. 2.) Business Cycle Model
- 26. 2.) Business Cycle -Looking at trend 趋向 over long periods of time. - Long Run Growth trend - Short Run Growth - Averaging out the short run. FIRST BASIC MODELS OF THE ECONOMY …………………………
- 27. Time Short Run Econ Growth Long Run -Looking at trend 趋向 over long periods of time. - Averaging out the short run. 2.) Business Cycle Model
- 28. or - highlevels of consumer spending, business confidence, profits and investment. Boom 2.) Business Cycle -Expansion - Some times called recovery as well is coming out of a recession - returning consumer spending and business confidence. - Recovery FIRST BASIC MODELS OF THE ECONOMY
- 29. Time Short Run Econ Growth Boomor - highlevels of consumer spending, business confidence, profits and investment. Expansion - Some times called recovery as well is coming out of a recession 2.) Business Cycle Model
- 30. -Peak or - height ofthe business cycle. Boom 2.) Business Cycle -Expansion FIRST BASIC MODELS OF THE ECONOMY
- 31. Time Short Run Econ Growth - heightof the business cycle. Peak 2.) Business Cycle Model
- 32. -Peak or Boom 2.) BusinessCycle -Expansion - Recession Slumpor - falling levels of consumer spending and confidence mean lower profits for businesses – which start to cut back on investment. FIRST BASIC MODELS OF THE ECONOMY
- 33. Time Short Run Econ Growth SlumporRecession - fallinglevels of consumer spending and confidence mean lower profits for businesses – which start to cut back on investment. 2.) Business Cycle Model
- 34. -Peak or Boom 2.) BusinessCycle -Expansion - Recession Slumpor - Bottom of the business cycle-Trough FIRST BASIC MODELS OF THE ECONOMY
- 35. Time Short Run Econ Growth Trough - bottomof the business cycle. 2.) Business Cycle Model
- 36. Time Short Run Econ Growth Long Run 2.)Business Cycle Model Peak Recession Trough Expansion
- 37. FIRST BASIC MODELSOF THE ECONOMY 3.) Production Possibilities Curve 1.) Circular Flow Model 2.) Business Cycle Model
- 38. 3.) Production Possibilities Curve (PPC) Production PossibilitiesFrontier (PPF) Also called: - a graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology. FIRST BASIC MODELS OF THE ECONOMY
- 39. 1.) Full employment:all resources are used 2.) Productive efficiency: goods are being produced in the least costly way 4.) Fixed 不变 amount of resources 5.) Fixed 不变 amount of technology 3.) Production Possibilities Curve Assumptions 假定:
- 40. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title The PPC could be a straight line, or bow- shaped. Depends on what happens to opportunity cost as economy shifts resources from one industry to the other. 3.) Production Possibilities Curve 枪炮 黄油
- 41. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A B C Any point that is OUTSIDE the PPC is Impossible! Impossible! 3.) Production Possibilities Curve
- 42. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A B C D Any point that is WITHIN the PPC is Inefficient. It means the resources are not completely being used. Inefficient All Area! 3.) Production Possibilities Curve
- 43. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A B C D Any point that is ON the PPC is Efficient. It means the resources being completely used. Efficient All are Points! 3.) Production Possibilities Curve
- 44. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods Economic Growth - Sustained expansion of the production possibilities frontier - to have economic growth means to increase the PPF so more can be produced without having to trade-off for as much. 3.) Production Possibilities Curve
- 45. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A Allocative Efficiency + Economic Growth By producing more Capital goods today, that means you can have more Capital goods and Consumption goods in the future. 3.) Production Possibilities Curve
- 46.
- 47. 1.) Circular Flow.- a basic way of understanding how different parts of the economic system fit together. FIRST BASIC MODELS OF THE ECONOMY
- 48. Households Firms G & S markets Demandstuff Supply stuff pay money earn income F & P markets Demand stuff Supply stuff earn income pay money Government transferstaxes taxessubsidies Demand stuff Demand stuff
- 49. 2.) Business Cycle- Looking at how the economy grows over time. FIRST BASIC MODELS OF THE ECONOMY
- 50. Time Short Run Econ Growth Long Run 2.)Business Cycle Model Peak Recession Trough Expansion
- 51. 3.) Production Possibilities Curve (PPC) Production PossibilitiesFrontier (PPF) Also called: - a graph that shows the combinations of two goods the economy can possibly produce given the available resources and the available technology. FIRST BASIC MODELS OF THE ECONOMY
- 52. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title The PPC could be a straight line, or bow- shaped. Depends on what happens to opportunity cost as economy shifts resources from one industry to the other. 3.) Production Possibilities Curve 枪炮 黄油
- 53. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A B C D Any point that is ON the PPC is Efficient. It means the resources being completely used. Efficient All are Points! 3.) Production Possibilities Curve
- 54. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A B C D Any point that is WITHIN the PPC is Inefficient. It means the resources are not completely being used. Inefficient All Area! 3.) Production Possibilities Curve
- 55. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A B C Any point that is OUTSIDE the PPC is Impossible! Impossible! 3.) Production Possibilities Curve
- 56. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods Economic Growth - Sustained expansion of the production possibilities frontier - to have economic growth means to increase the PPF so more can be produced without having to trade-off for as much. 3.) Production Possibilities Curve
- 57. 0 1,000 2,000 3,000 4,000 5,000 6,000 0 100 200300 400 500 600 AxisTitle Axis Title Consumption goods Capital goods A Allocative Efficiency + Economic Growth By producing more Capital goods today, that means you can have more Capital goods and Consumption goods in the future. 3.) Production Possibilities Curve
- 58. The End. Thank you Please view the next PPT about the PPC in more detail.