1. Economic models like the production possibility frontier and circular flow diagram provide simplified representations of complex real-world economies. These models illustrate key economic concepts like opportunity costs, gains from trade, and the flows of goods and money between households and businesses.
2. The production possibility frontier shows the tradeoffs between producing different goods that an economy faces. Comparative advantage explains why specialization and trade can benefit all parties involved.
3. Economists use models to understand economies from both a positive and normative perspective. While positive analyses aim to describe economic systems as they are, normative analyses involve value judgments about how things should be. Disagreements among economists arise from differing views on modeling assumptions and values.
1. This chapter introduces the basic principles of economics, including principles of individual choice, how choices interact, and economy-wide interactions. It establishes that economics analyzes choices must be made because resources are scarce.
2. Key concepts introduced are opportunity costs, marginal analysis for decision making, incentives, gains from trade through specialization, markets moving toward equilibrium, and situations where government intervention may be needed to improve efficiency.
3. The chapter lays out a framework of microeconomic and macroeconomic analysis based on these foundational principles.
The document summarizes David Ricardo's theory of comparative advantage from 1817. It explains that Ricardo formalized the idea that countries can benefit from trade even if one country is more productive in all areas. Ricardo used a numerical example to show that if countries specialize in their comparative advantage goods, where their productivity is relatively higher, then total production can increase. The theory assumes differences in productivity across countries and industries and argues countries should allocate resources to comparative advantage industries to maximize global output through specialization and trade.
This document provides an introduction to international economics. It discusses that international economics deals with economic interactions between independent nations, and analyzes issues like the gains from trade, patterns of trade, trade policies, balance of payments, exchange rates, and international policy coordination. It notes that international trade focuses on real transactions of goods while international monetary analysis examines financial transactions and exchange rates. The overall topic will cover international trade theory and policy as well as exchange rates and international macroeconomic policy.
This document discusses several theories of international economics, including: mercantilism, absolute advantage, comparative advantage, Heckscher-Ohlin theory, and Heckscher-Ohlin-Samuelson theorem. It also covers international trade protections, foreign exchange markets, currency exchange rates, balance of payments, and the history and principles of agrarian reform laws in the Philippines.
1) General equilibrium analysis studies when all markets in an economy are simultaneously in equilibrium. It looks at the interdependence between economic agents.
2) The model assumes two goods, two consumers, two factors of production (labor and capital), perfect competition, and profit/utility maximization.
3) Equilibrium in production occurs when firms maximize profits by equalizing marginal rates of technical substitution between goods. Equilibrium in exchange occurs when consumers maximize utility by equalizing marginal rates of substitution between goods with their budget constraints.
4) Overall general equilibrium is reached when rates of substitution are equal between consumers and firms, meaning the economy is using its resources efficiently at the tangency point between the production possibility frontier and indifference
This chapter discusses supply and demand and the competitive market model. It defines key concepts such as:
- The demand and supply curves which graphically show the relationship between price and quantity demanded/supplied.
- Market equilibrium which occurs where the supply and demand curves intersect at the equilibrium price and quantity.
- How shifts in the curves, representing changes in underlying factors, impact the equilibrium price and quantity in the market.
Specifically, an increase in demand results in a higher equilibrium price and quantity, while an increase in supply lowers the equilibrium price but raises the quantity. The chapter provides examples and illustrations of these concepts.
The document discusses how economic growth and changes in factors of production, technology, and tastes can impact international trade. It examines different types of factor growth, technical progress, and their effects on production possibilities and trade. Growth can lead to increased, decreased, or unchanged trade volumes depending on whether production and consumption effects are pro-trade or anti-trade. In large countries, growth impacts welfare through terms-of-trade and wealth effects, and can potentially cause immiserizing growth under certain conditions. Growth and changes in both trading nations will shift their production possibilities and can influence trade volumes and terms of trade.
The Markets for the Factors of ProductionChris Thomas
The document discusses labor markets and the markets for factors of production. It explains that:
1) Labor demand is derived from a firm's production function and decision to supply goods. Firms hire labor up to the point where the marginal product of an additional worker equals the wage.
2) Labor supply comes from individuals' choices about how much to work based on wages. Equilibrium in the labor market is reached at the wage where supply meets demand.
3) The prices of factors like capital and land are also determined by supply and demand in their respective markets. In all markets, factors earn their marginal product.
1. This chapter introduces the basic principles of economics, including principles of individual choice, how choices interact, and economy-wide interactions. It establishes that economics analyzes choices must be made because resources are scarce.
2. Key concepts introduced are opportunity costs, marginal analysis for decision making, incentives, gains from trade through specialization, markets moving toward equilibrium, and situations where government intervention may be needed to improve efficiency.
3. The chapter lays out a framework of microeconomic and macroeconomic analysis based on these foundational principles.
The document summarizes David Ricardo's theory of comparative advantage from 1817. It explains that Ricardo formalized the idea that countries can benefit from trade even if one country is more productive in all areas. Ricardo used a numerical example to show that if countries specialize in their comparative advantage goods, where their productivity is relatively higher, then total production can increase. The theory assumes differences in productivity across countries and industries and argues countries should allocate resources to comparative advantage industries to maximize global output through specialization and trade.
This document provides an introduction to international economics. It discusses that international economics deals with economic interactions between independent nations, and analyzes issues like the gains from trade, patterns of trade, trade policies, balance of payments, exchange rates, and international policy coordination. It notes that international trade focuses on real transactions of goods while international monetary analysis examines financial transactions and exchange rates. The overall topic will cover international trade theory and policy as well as exchange rates and international macroeconomic policy.
This document discusses several theories of international economics, including: mercantilism, absolute advantage, comparative advantage, Heckscher-Ohlin theory, and Heckscher-Ohlin-Samuelson theorem. It also covers international trade protections, foreign exchange markets, currency exchange rates, balance of payments, and the history and principles of agrarian reform laws in the Philippines.
1) General equilibrium analysis studies when all markets in an economy are simultaneously in equilibrium. It looks at the interdependence between economic agents.
2) The model assumes two goods, two consumers, two factors of production (labor and capital), perfect competition, and profit/utility maximization.
3) Equilibrium in production occurs when firms maximize profits by equalizing marginal rates of technical substitution between goods. Equilibrium in exchange occurs when consumers maximize utility by equalizing marginal rates of substitution between goods with their budget constraints.
4) Overall general equilibrium is reached when rates of substitution are equal between consumers and firms, meaning the economy is using its resources efficiently at the tangency point between the production possibility frontier and indifference
This chapter discusses supply and demand and the competitive market model. It defines key concepts such as:
- The demand and supply curves which graphically show the relationship between price and quantity demanded/supplied.
- Market equilibrium which occurs where the supply and demand curves intersect at the equilibrium price and quantity.
- How shifts in the curves, representing changes in underlying factors, impact the equilibrium price and quantity in the market.
Specifically, an increase in demand results in a higher equilibrium price and quantity, while an increase in supply lowers the equilibrium price but raises the quantity. The chapter provides examples and illustrations of these concepts.
The document discusses how economic growth and changes in factors of production, technology, and tastes can impact international trade. It examines different types of factor growth, technical progress, and their effects on production possibilities and trade. Growth can lead to increased, decreased, or unchanged trade volumes depending on whether production and consumption effects are pro-trade or anti-trade. In large countries, growth impacts welfare through terms-of-trade and wealth effects, and can potentially cause immiserizing growth under certain conditions. Growth and changes in both trading nations will shift their production possibilities and can influence trade volumes and terms of trade.
The Markets for the Factors of ProductionChris Thomas
The document discusses labor markets and the markets for factors of production. It explains that:
1) Labor demand is derived from a firm's production function and decision to supply goods. Firms hire labor up to the point where the marginal product of an additional worker equals the wage.
2) Labor supply comes from individuals' choices about how much to work based on wages. Equilibrium in the labor market is reached at the wage where supply meets demand.
3) The prices of factors like capital and land are also determined by supply and demand in their respective markets. In all markets, factors earn their marginal product.
Saving, Investment, and the Financial SystemChris Thomas
This document discusses the financial system and financial institutions in the US economy. It explains that the financial system consists of institutions that match savers and borrowers. It identifies key financial markets like the stock and bond markets, and intermediaries like banks and mutual funds. It also discusses how government policies on taxes, deficits, and debt can influence saving, investment, and interest rates in the market for loanable funds.
This chapter introduces some of the key principles of economics. It discusses that economics addresses questions about how societies manage scarce resources. It explores four main principles: how people make decisions, how people interact, how markets usually provide a good way to organize economic activity, and how governments can sometimes improve market outcomes. The chapter provides examples and discussion of opportunity costs, incentives, trade, and the role of prices in allocating resources. It also addresses how a country's standard of living depends on its ability to produce goods and services.
This document provides an overview of classical theories of inflation and the quantity theory of money. It defines key concepts like money, inflation, the money supply, and velocity. The quantity theory of money posits that inflation is primarily caused by increases in the money supply that outpace economic growth. It predicts a direct relationship between money growth and inflation. The document uses graphs and international data to show this relationship generally holds in practice and discusses implications for interest rates.
This document summarizes the key concepts of the Ricardian model of international trade. The model shows that countries can benefit from trade based on differences in comparative advantage even if one country is more productive in all goods. With trade, countries specialize in producing goods where they have lower opportunity costs, allowing for increased overall production and consumption. Gains from trade come from exploiting comparative rather than absolute advantage across countries.
Factor endowments and the heckscher ohlin theory (chapter 5)Rasel Ahamed
This document presents a group presentation to Professor Ayesha Akhter of the Department of Finance at Jagannath University by Group 4. The presentation includes:
1. An introduction and list of group members and their student IDs.
2. An outline of Chapter 5 on the Heckscher-Ohlin theory of international trade, including assumptions, factor intensities, factor abundance, and the shape of production frontiers.
3. Summaries of sections on the Heckscher-Ohlin theory, factor price equalization, and illustrations of the models by various group members.
20130126 international economics chap1 introductionFED事務局
This document provides an overview of key concepts in international economics. It discusses Japan's long economic stagnation and potential policy solutions like Abenomics. It then outlines important resources for economic growth like capital, human resources, and natural resources. The document also examines why trade is important, comparing it to innovation. It provides definitions of economics from different sources and distinguishes between microeconomics and macroeconomics. Finally, it previews the four parts of the textbook, which will cover international trade theory, policy, exchange rates, and macroeconomic policy.
C03 Krugman Labor productivity and Comparative Advantage: The Ricardian ModelAsusena Tártaros
This document provides an overview of the Ricardian model of comparative advantage and international trade. It discusses key concepts such as opportunity costs, comparative advantage, production possibility frontiers, and gains from trade. The model assumes two countries and two goods (wine and cheese) are produced using only labor. It shows that even if one country is more efficient in producing both goods, each country can still gain from specializing in the good where they have a comparative advantage and trading. When countries trade based on comparative advantage, global production possibilities expand.
1) The document introduces the field of development economics, which uses economic analysis to understand challenges facing developing countries, including causes of poverty and paths to escape poverty.
2) It discusses different views of development, including traditional measures like GNI per capita as well as broader concepts like empowering women and expanding human freedoms and capabilities.
3) Key topics in development economics include absolute and relative poverty, characteristics of developing nations, and achieving the Millennium Development Goals.
This document provides an overview of a macroeconomic model that examines national income. It discusses how total output is determined by factors of production like capital and labor. It then explains how factor prices, like wages and rental rates, are set through supply and demand in factor markets. The model shows how total national income is distributed to factor payments. It also outlines the components of aggregate demand, like consumption, investment, and government spending, and how their equilibrium in the goods market determines total output.
1) The chapter uses the IS-LM model to analyze the effects of fiscal and monetary policy shocks on aggregate output and the interest rate in the short run.
2) Fiscal policy like increases in government spending or tax cuts shift the IS curve right, raising output. Monetary policy like increases in the money supply shift the LM curve down, lowering interest rates and raising output.
3) Shocks like increases in wealth from a stock market boom shift the IS curve right, raising output, while shocks that increase money demand like credit card fraud shift the LM curve left, lowering output.
4) In the long run, price adjustments return output to potential as the price level falls to accommodate any short
This chapter discusses two modern theories of business cycles:
1) Real Business Cycle theory assumes flexible prices and that fluctuations result from optimal responses to productivity shocks.
2) New Keynesian theory explains why prices and wages are sticky in the short-run, causing recessions as coordination failures when firms do not lower prices together. It incorporates insights from both schools to better understand economic fluctuations.
The document discusses monetary and fiscal policies used to address inflation. It defines inflation and describes its stages and types. The causes of demand-pull and cost-push inflation are explained. Effects of inflation and instruments of monetary policy like bank rate, cash reserve ratio, and open market operations are summarized. Key differences between monetary and fiscal policy are highlighted. Objectives of monetary policy to maintain price stability and credit flow are stated.
This document discusses the natural rate of unemployment and its causes. It begins by defining the natural rate of unemployment as the average rate around which the actual unemployment rate fluctuates over the business cycle. It then presents a model showing how the natural rate is determined by the rates of job separation and job finding. Frictional unemployment results from the time it takes to search for and transition between jobs, while structural unemployment stems from wage rigidities that prevent wages from adjusting downward to clear the labor market. The document explores factors like minimum wages, unions, efficiency wages, and sectoral shifts that contribute to real wage rigidity and the natural rate of unemployment.
A Macroeconomic Theory of the Open EconomyChris Thomas
This document discusses macroeconomic models of open economies. It covers key variables like net exports and exchange rates. It describes the markets for loanable funds and foreign currency exchange. The supply of and demand for loanable funds depends on the interest rate and determines investment levels. The foreign exchange market balances supply of dollars for net capital outflows with demand for dollars for net exports. Government deficits reduce loanable funds and increase interest rates, lowering investment and currency value. Trade policies like tariffs impact trade levels but not overall balances due to exchange rate adjustments. Political instability can trigger capital flight, raising rates and depreciating currencies.
The chapter discusses the Heckscher-Ohlin model of international trade. The model assumes two countries that produce two goods using two factors of production, labor and land. It predicts that a country will export the good that uses its abundant factor intensively and import the good that uses its scarce factor intensively. The model shows that trade leads to equalization of factor prices between countries and benefits owners of a country's abundant factor but harms owners of its scarce factor. Empirical tests find mixed support for the model and technological differences are also important in determining trade patterns.
Comparative Economic Systems - Intro to Capitalism. Read about the Capitalism, its advantages and disadvantages. You will find it helpful in your studies. Don't forget to like and follow.
Chapter 18-The Markets for the Factors of Production.pptxsgrQuliyev
This document summarizes key concepts from Chapter 18 of N. Gregory Mankiw's Principles of Economics, 9th Edition relating to factor markets. It discusses the derived demand for factors of production from firms' production decisions. Labor demand depends on firms' marginal productivity of labor and profit maximization. The demand and supply of labor determines equilibrium wages. Immigration can impact wages for different types of workers. Equilibrium rental prices for land and capital also equal their marginal productivity. Productivity growth has historically driven increases in real wages over time.
This document outlines 10 principles of economics:
1) People face tradeoffs when making decisions that require choosing one goal over another.
2) The cost of something is measured by what one gives up to obtain it, known as opportunity cost.
3) Rational people make decisions by comparing marginal costs and benefits of small incremental changes.
4) Markets are usually a good way to organize economic activity as they allow for specialization and gains from trade, but governments can intervene to address market failures or inequities.
5) A country's standard of living depends on its level of productivity and production.
This document discusses tariffs and their economic effects. It defines tariffs as taxes on imports and describes different types of tariffs such as ad valorem and specific tariffs. The document then analyzes the consumption, production, trade, and revenue effects of imposing a tariff using a partial equilibrium model. It also discusses the impact of tariffs on consumer and producer surplus. Finally, it provides an example comparing the effects of a tariff versus an import quota.
This document provides an introduction to economics, including definitions, concepts, and models. It discusses:
1) The definitions of economics, microeconomics, and macroeconomics. Economics studies how scarce resources are allocated, while micro focuses on individual units and macro on aggregate data.
2) The concepts of scarcity, choice, and opportunity cost. Resources are limited so societies must choose how to allocate them. The opportunity cost is the next best alternative forgone.
3) The production possibilities frontier model. This curve illustrates the tradeoff between two goods based on available resources, showing attainable, inefficient, and unattainable points. It also demonstrates opportunity costs between points.
Price Ceiling and Price Floors. 2022.pptJon Newland
This document discusses economic efficiency and the impacts of price ceilings and price floors using supply and demand analysis. It begins by explaining that economic efficiency is maximized at competitive market equilibrium. When markets are not at equilibrium, there is a deadweight loss. The document then analyzes the impacts of price ceilings and price floors using supply and demand graphs. It shows that price ceilings create shortages while price floors create surpluses. Both result in deadweight losses that reduce total economic surplus.
Saving, Investment, and the Financial SystemChris Thomas
This document discusses the financial system and financial institutions in the US economy. It explains that the financial system consists of institutions that match savers and borrowers. It identifies key financial markets like the stock and bond markets, and intermediaries like banks and mutual funds. It also discusses how government policies on taxes, deficits, and debt can influence saving, investment, and interest rates in the market for loanable funds.
This chapter introduces some of the key principles of economics. It discusses that economics addresses questions about how societies manage scarce resources. It explores four main principles: how people make decisions, how people interact, how markets usually provide a good way to organize economic activity, and how governments can sometimes improve market outcomes. The chapter provides examples and discussion of opportunity costs, incentives, trade, and the role of prices in allocating resources. It also addresses how a country's standard of living depends on its ability to produce goods and services.
This document provides an overview of classical theories of inflation and the quantity theory of money. It defines key concepts like money, inflation, the money supply, and velocity. The quantity theory of money posits that inflation is primarily caused by increases in the money supply that outpace economic growth. It predicts a direct relationship between money growth and inflation. The document uses graphs and international data to show this relationship generally holds in practice and discusses implications for interest rates.
This document summarizes the key concepts of the Ricardian model of international trade. The model shows that countries can benefit from trade based on differences in comparative advantage even if one country is more productive in all goods. With trade, countries specialize in producing goods where they have lower opportunity costs, allowing for increased overall production and consumption. Gains from trade come from exploiting comparative rather than absolute advantage across countries.
Factor endowments and the heckscher ohlin theory (chapter 5)Rasel Ahamed
This document presents a group presentation to Professor Ayesha Akhter of the Department of Finance at Jagannath University by Group 4. The presentation includes:
1. An introduction and list of group members and their student IDs.
2. An outline of Chapter 5 on the Heckscher-Ohlin theory of international trade, including assumptions, factor intensities, factor abundance, and the shape of production frontiers.
3. Summaries of sections on the Heckscher-Ohlin theory, factor price equalization, and illustrations of the models by various group members.
20130126 international economics chap1 introductionFED事務局
This document provides an overview of key concepts in international economics. It discusses Japan's long economic stagnation and potential policy solutions like Abenomics. It then outlines important resources for economic growth like capital, human resources, and natural resources. The document also examines why trade is important, comparing it to innovation. It provides definitions of economics from different sources and distinguishes between microeconomics and macroeconomics. Finally, it previews the four parts of the textbook, which will cover international trade theory, policy, exchange rates, and macroeconomic policy.
C03 Krugman Labor productivity and Comparative Advantage: The Ricardian ModelAsusena Tártaros
This document provides an overview of the Ricardian model of comparative advantage and international trade. It discusses key concepts such as opportunity costs, comparative advantage, production possibility frontiers, and gains from trade. The model assumes two countries and two goods (wine and cheese) are produced using only labor. It shows that even if one country is more efficient in producing both goods, each country can still gain from specializing in the good where they have a comparative advantage and trading. When countries trade based on comparative advantage, global production possibilities expand.
1) The document introduces the field of development economics, which uses economic analysis to understand challenges facing developing countries, including causes of poverty and paths to escape poverty.
2) It discusses different views of development, including traditional measures like GNI per capita as well as broader concepts like empowering women and expanding human freedoms and capabilities.
3) Key topics in development economics include absolute and relative poverty, characteristics of developing nations, and achieving the Millennium Development Goals.
This document provides an overview of a macroeconomic model that examines national income. It discusses how total output is determined by factors of production like capital and labor. It then explains how factor prices, like wages and rental rates, are set through supply and demand in factor markets. The model shows how total national income is distributed to factor payments. It also outlines the components of aggregate demand, like consumption, investment, and government spending, and how their equilibrium in the goods market determines total output.
1) The chapter uses the IS-LM model to analyze the effects of fiscal and monetary policy shocks on aggregate output and the interest rate in the short run.
2) Fiscal policy like increases in government spending or tax cuts shift the IS curve right, raising output. Monetary policy like increases in the money supply shift the LM curve down, lowering interest rates and raising output.
3) Shocks like increases in wealth from a stock market boom shift the IS curve right, raising output, while shocks that increase money demand like credit card fraud shift the LM curve left, lowering output.
4) In the long run, price adjustments return output to potential as the price level falls to accommodate any short
This chapter discusses two modern theories of business cycles:
1) Real Business Cycle theory assumes flexible prices and that fluctuations result from optimal responses to productivity shocks.
2) New Keynesian theory explains why prices and wages are sticky in the short-run, causing recessions as coordination failures when firms do not lower prices together. It incorporates insights from both schools to better understand economic fluctuations.
The document discusses monetary and fiscal policies used to address inflation. It defines inflation and describes its stages and types. The causes of demand-pull and cost-push inflation are explained. Effects of inflation and instruments of monetary policy like bank rate, cash reserve ratio, and open market operations are summarized. Key differences between monetary and fiscal policy are highlighted. Objectives of monetary policy to maintain price stability and credit flow are stated.
This document discusses the natural rate of unemployment and its causes. It begins by defining the natural rate of unemployment as the average rate around which the actual unemployment rate fluctuates over the business cycle. It then presents a model showing how the natural rate is determined by the rates of job separation and job finding. Frictional unemployment results from the time it takes to search for and transition between jobs, while structural unemployment stems from wage rigidities that prevent wages from adjusting downward to clear the labor market. The document explores factors like minimum wages, unions, efficiency wages, and sectoral shifts that contribute to real wage rigidity and the natural rate of unemployment.
A Macroeconomic Theory of the Open EconomyChris Thomas
This document discusses macroeconomic models of open economies. It covers key variables like net exports and exchange rates. It describes the markets for loanable funds and foreign currency exchange. The supply of and demand for loanable funds depends on the interest rate and determines investment levels. The foreign exchange market balances supply of dollars for net capital outflows with demand for dollars for net exports. Government deficits reduce loanable funds and increase interest rates, lowering investment and currency value. Trade policies like tariffs impact trade levels but not overall balances due to exchange rate adjustments. Political instability can trigger capital flight, raising rates and depreciating currencies.
The chapter discusses the Heckscher-Ohlin model of international trade. The model assumes two countries that produce two goods using two factors of production, labor and land. It predicts that a country will export the good that uses its abundant factor intensively and import the good that uses its scarce factor intensively. The model shows that trade leads to equalization of factor prices between countries and benefits owners of a country's abundant factor but harms owners of its scarce factor. Empirical tests find mixed support for the model and technological differences are also important in determining trade patterns.
Comparative Economic Systems - Intro to Capitalism. Read about the Capitalism, its advantages and disadvantages. You will find it helpful in your studies. Don't forget to like and follow.
Chapter 18-The Markets for the Factors of Production.pptxsgrQuliyev
This document summarizes key concepts from Chapter 18 of N. Gregory Mankiw's Principles of Economics, 9th Edition relating to factor markets. It discusses the derived demand for factors of production from firms' production decisions. Labor demand depends on firms' marginal productivity of labor and profit maximization. The demand and supply of labor determines equilibrium wages. Immigration can impact wages for different types of workers. Equilibrium rental prices for land and capital also equal their marginal productivity. Productivity growth has historically driven increases in real wages over time.
This document outlines 10 principles of economics:
1) People face tradeoffs when making decisions that require choosing one goal over another.
2) The cost of something is measured by what one gives up to obtain it, known as opportunity cost.
3) Rational people make decisions by comparing marginal costs and benefits of small incremental changes.
4) Markets are usually a good way to organize economic activity as they allow for specialization and gains from trade, but governments can intervene to address market failures or inequities.
5) A country's standard of living depends on its level of productivity and production.
This document discusses tariffs and their economic effects. It defines tariffs as taxes on imports and describes different types of tariffs such as ad valorem and specific tariffs. The document then analyzes the consumption, production, trade, and revenue effects of imposing a tariff using a partial equilibrium model. It also discusses the impact of tariffs on consumer and producer surplus. Finally, it provides an example comparing the effects of a tariff versus an import quota.
This document provides an introduction to economics, including definitions, concepts, and models. It discusses:
1) The definitions of economics, microeconomics, and macroeconomics. Economics studies how scarce resources are allocated, while micro focuses on individual units and macro on aggregate data.
2) The concepts of scarcity, choice, and opportunity cost. Resources are limited so societies must choose how to allocate them. The opportunity cost is the next best alternative forgone.
3) The production possibilities frontier model. This curve illustrates the tradeoff between two goods based on available resources, showing attainable, inefficient, and unattainable points. It also demonstrates opportunity costs between points.
Price Ceiling and Price Floors. 2022.pptJon Newland
This document discusses economic efficiency and the impacts of price ceilings and price floors using supply and demand analysis. It begins by explaining that economic efficiency is maximized at competitive market equilibrium. When markets are not at equilibrium, there is a deadweight loss. The document then analyzes the impacts of price ceilings and price floors using supply and demand graphs. It shows that price ceilings create shortages while price floors create surpluses. Both result in deadweight losses that reduce total economic surplus.
Principles of Economics 5th Edition Gans Solutions ManualGordonlANA
This chapter introduces key economic concepts and models used to think like an economist. It discusses how economists use scientific methods and assumptions to build simplified models that provide insight into real-world phenomena. The circular flow diagram and production possibilities frontier are presented as introductory models. Microeconomics focuses on individual decision-making of households and firms, while macroeconomics analyzes economy-wide forces. Positive statements describe the world as it is, while normative statements make claims about how the world should be. Economists may offer conflicting policy advice due to differences in scientific judgments or values.
The document provides an overview of key economic concepts from an introductory economics textbook. It defines economics as the study of choice under scarcity and discusses the three economic questions of what, how, and for whom to produce. It also outlines the key principles of economics, including opportunity cost, marginal analysis, voluntary exchange, diminishing returns, and the difference between real and nominal values. The document uses examples and diagrams to illustrate these fundamental economic concepts.
This document provides an overview of key economic concepts including:
(1) Economics is the study of how societies use scarce resources efficiently; (2) Scarcity and efficiency are the central themes as resources are limited but wants are unlimited; (3) The production possibility frontier (PPF) shows the maximum output combinations an economy can produce given scarce resources.
This document provides an overview of key economic concepts covered in chapters 1-3 of an economics textbook. It begins with definitions of economics and the founder of economics, Adam Smith. It then covers microeconomics and macroeconomics, scarcity, efficiency, factors of production, and the production possibility frontier. The document also discusses different economic systems, opportunity cost, demand and determinants of demand, the law of demand, supply and determinants of supply, and the law of supply.
This document provides an introduction to economics, distinguishing between microeconomics and macroeconomics. It defines economics as the study of how society uses scarce resources to produce goods and services. Microeconomics examines individual choices of households, businesses, and markets, while macroeconomics looks at overall national and global economic performance. The document also discusses the fundamental economic questions of what, how, and for whom to produce goods and services. It introduces the concept of opportunity cost and uses the production possibilities curve to illustrate scarcity, choice, and trade-offs.
Thinking like an economist, economists-A scientist or A policy adviserRAHUL SINHA
The document discusses two key economic models - the circular flow diagram and the production possibilities frontier.
The circular flow diagram shows the continuous movement of money and resources between households and firms through two types of markets. Households earn income by supplying factors of production like labor to firms, then use that income to purchase goods and services from firms, completing the circular flow.
The production possibilities frontier illustrates the key economic problem of scarcity by showing the maximum possible output combinations of two goods or services an economy can produce with limited resources. Points on the curve represent efficient production, while inside points are inefficient. The slope also demonstrates the opportunity cost of producing more of one good.
1. The chapter discusses the Ricardian model of comparative advantage and international trade. It introduces the concept of comparative advantage and shows how trade benefits countries through specialization according to their comparative advantages.
2. In a one-factor economy with two goods, the theory of comparative advantage demonstrates that both countries can gain from trade even if one has an absolute advantage in producing both goods. Specialization and trade allows total production to increase.
3. Extensions to many goods and factors do not change the conclusions. Comparative advantage is determined by relative opportunity costs of production, and free trade according to this principle maximizes global production.
This chapter discusses how economies of scale can lead to international trade even when countries are identical. It provides an example where concentrating widget production in one country allows both countries to consume a variety of goods through trade, taking advantage of larger scale of production. There are two types of economies of scale - external, which apply at the industry level, and internal, which apply at the firm level. External economies can arise from specialized suppliers, labor market pooling, and knowledge spillovers between firms. The chapter focuses on external economies and how they can encourage trade by allowing industries to cluster in certain locations.
This document provides an introduction to microeconomics. It defines economics as the study of how individuals and societies choose to employ scarce resources. It discusses four main definitions of economics from classical economists like Adam Smith to modern economists. It then distinguishes between microeconomics and macroeconomics, with microeconomics focusing on individual units like firms and resource allocation, and macroeconomics studying overall aggregates like total production and consumption. The document also covers different types of economies (capitalist, socialist, mixed), central economic problems of resource allocation, and production possibility curves to illustrate scarcity.
This chapter discusses key economic concepts like opportunity cost, production possibilities frontiers, comparative advantage and gains from trade. It introduces the circular flow model to illustrate how households and firms interact in markets. It also explains how free markets and private property rights help coordinate economic activity and maximize societal benefit through specialization and voluntary exchange.
Country A can produce 100 cars or 50 TVs
Country B can produce 80 cars or 60 TVs
Country A has an absolute advantage in cars and TVs
Country B has a comparative advantage in TVs
Country A should specialize in cars and export cars
Country B should specialize in TVs and export TVs
Country A should import TVs
Country B should import cars
This is an output question. OOO
50
Comparative Advantage Practice
Create a chart for each of the following problems.
This document summarizes a lecture on microeconomics. It defines key microeconomic concepts like scarcity, choice, opportunity cost, and rational decision-making. It explains that microeconomics studies how individuals and firms make choices and how supply and demand determines prices and quantities of goods and services. It also discusses the objectives of microeconomics as efficiency in production and consumption, as well as concepts like production possibility curves that illustrate scarcity and tradeoffs.
Monopoly_Chapter 15_Macroeconomics_ Mankew power point slidesdjalex035
This chapter discusses monopoly markets. It begins by defining a monopoly as a sole seller of a product without close substitutes. Monopolies arise due to barriers to entry, including ownership of key resources, government protections like patents, or natural monopolies where large scale production is more efficient. As the sole seller, a monopoly faces a downward sloping demand curve and is a price maker, unlike competitive firms which are price takers. The chapter then analyzes how monopolies determine price and quantity to maximize profits by producing at the quantity where marginal revenue equals marginal cost. This results in the monopoly price exceeding average cost and the firm earning economic profits.
Economists use models like the circular flow diagram and production possibilities frontier (PPF) to study economic concepts. The circular flow diagram shows how resources and dollars flow between households and firms. The PPF illustrates production tradeoffs and opportunity costs given limited resources. Microeconomics analyzes individual markets, while macroeconomics examines economy-wide issues. Economists aim to explain the world scientifically and advise on policy normatively.
This document discusses the theory of comparative advantage. It provides background on the theory, which was first described by Robert Torrens in 1815 and later formalized by David Ricardo. Ricardo used a numerical example to show that even if one country has an absolute advantage in all goods, both countries can still benefit from trade based on their comparative advantages. The document also outlines Ricardo's assumptions, provides his numerical example comparing Kenya and Ethiopia, and discusses limitations of the theory.
economics chapter 1 and chapChapter 1.pptxabiabina1
The document provides an outline for an economics course covering microeconomic and macroeconomic concepts. It includes:
1) 6 chapters that will cover the nature of economics, demand and supply theories, consumer behavior, production and costs, market structure, and fundamental macroeconomic concepts.
2) Each chapter is further broken down into sections that will be taught, such as the definition of economics, scarcity and choice, economic systems, and the circular flow model.
3) The course aims to enable students to use economic tools to analyze micro and macroeconomic issues and answer questions about resources, demand, production, and markets.
The document discusses several key economic concepts:
1) Production is the process of transforming resources into useful goods and services. All societies must decide what to produce, how to produce it, and who gets what is produced.
2) Specialization and trade allow countries to benefit even if one has an absolute advantage in all areas, because of comparative advantage based on opportunity costs.
3) Investment uses resources to produce capital for the future, but has an opportunity cost of present consumption. Capital goods are used to produce other goods, while consumer goods are for immediate use.
4) The production possibility frontier graphically shows tradeoffs in what an economy can produce given scarce resources, and shifts outward with economic growth over time from
Ronald Reagan defeated incumbent Jimmy Carter in the 1980 presidential election. During Reagan's two terms as president from 1981 to 1989, he implemented supply-side economic policies known as "Reaganomics" which advocated tax cuts and reduced government spending. Reagan greatly increased defense spending which led to a tripling of the national debt. He nominated the first female Supreme Court justice, Sandra Day O'Connor, and two other conservative justices. The Challenger space shuttle disaster occurred in 1986 during Reagan's presidency. He worked to improve relations with the Soviet Union through meetings with Mikhail Gorbachev and their discussions of glasnost and perestroika. George H.W. Bush succeeded Reagan as president in 1989.
This document discusses Texas' political culture and diversity. It covers several topics:
- The relationship between Texas' conservative political ideology and its public policies which favor low taxes and limited social services.
- How the state's political culture varies regionally, with East Texas having a more traditional culture while urban areas like Houston are more individualistic.
- The struggles of women, African Americans, Latinos, and LGBT groups to gain equal rights, often turning to the Supreme Court to overcome resistance from the conservative state politics.
- How Texas' population is becoming more culturally diverse as the state experiences rapid growth, which could impact its future politics, culture, and income inequality.
This letter thanks the Academics Team for their appreciation, as the four writers enjoyed their travels last week. The letter contains greetings in multiple languages and the writers express how wonderful it feels to feel appreciated.
The document outlines the textbook adoption process and timeline for the district. It includes:
1) The adoption will cover social studies and fine arts/music materials for K-12 for the 2014-2015 school year.
2) Key dates and activities are provided, including vendor fairs in December and January, a campus voting window from January 26th to February 12th, and presenting recommendations to the school board for approval in April.
3) Guidelines are given for campus voting, including requirements that all eligible teachers vote, ballots are anonymous, and results are tallied in presence of those voting and signed before being submitted to the district office.
This document discusses civil liberties and related topics covered in Chapter 4. It begins by defining civil liberties as basic political freedoms that protect citizens from governmental overreach. It then addresses balancing civil liberties with competing interests like security. Specific civil liberties addressed include freedom of speech, religion, press, criminal defendants' rights, and privacy rights. Public opinion polls question views on limiting some liberties, hate speech, school prayer, and abortion.
This document discusses the concept of federalism, which refers to a system of government that divides power between a central national government and several state or local governments. It outlines some key aspects of federalism, including how power is balanced and shared between different levels of government. For example, the national government is responsible for issues like national defense, while states have powers over issues such as smoking laws. The document also examines different models of federalism and how the balance of power between national and state governments has evolved over time in the United States.
This document discusses the concept of federalism, which refers to a system of government that divides power between a central national government and several state or local governments. It outlines some key aspects of federalism such as the sharing and balancing of powers between federal and state governments. For example, the national government is responsible for national defense but not local issues like smoking laws. The document also examines different models of federalism and how the balance of power between federal and state governments has evolved over time in the United States.
The document provides an overview of Lincoln-Douglas debate formats and procedures. It discusses that LD debates focus on values and individual vs. societal rights. Each debate follows a structured format with timed speeches where debaters argue both sides of a topic that changes every two months. Debaters present cases structured around a value premise and criteria, then rebut each other's arguments before a judge decides the winner. The document outlines the step-by-step process and guidelines debaters should follow to participate successfully in an LD debate tournament.
This document provides information on how to calculate the official unemployment rate. It explains that the labor force consists of the employed plus the unemployed in a country or region. Those not included in the labor force are stay-at-home parents, full-time students not looking for work, and retirees. If an unemployed person stops looking for work, they drop out of the labor force. It then gives a quick example of calculating the labor force and unemployment rate for the fictional country of Obamastan.
The document provides an overview of APA formatting style, which is intended for use in science, math, and social studies research papers. It discusses the four major sections of an APA paper: the title page, abstract, main body, and references page. Specific guidelines are provided for each section, including how to format the running head, title, author's name, and institutional affiliation on the title page. Examples are also given for how to write an abstract, incorporate citations in the text, and structure the references page. Key requirements covered include using hanging indention, providing publication details for different source types, and ensuring references are listed alphabetically.
This document provides an overview of local and county governments and special districts in Texas. It discusses the three levels of local government - municipal, county, and special districts. For municipalities, it describes the types (general law vs home rule), forms of government (mayor-council, council-manager, commission), and elections. It also discusses the roles and structures of county governments and special districts. Throughout, it provides examples and details on how these local governments are organized and operate to serve citizens in Texas.
This document discusses the judicial system and due process in Texas. It covers various topics like crime and punishment trends in Texas, the different levels of law enforcement from state to local, and the stages of due process that individuals accused of crimes go through. Crime rates have generally been decreasing in Texas since the 1990s due to factors like an aging population and longer sentences for violent offenders. Texas leads the nation in incarceration rates and costs of corrections. Capital punishment also remains controversial in Texas as it executes more prisoners than any other state.
This document discusses the court system in Texas. It explains that there are over 3,000 courts in Texas that handle over 10 million cases per year. Cases can be either civil, involving disputes between individuals or corporations, or criminal, involving violations of laws. It describes the different levels and types of trial courts and appellate courts in Texas and their jurisdictions. It also covers topics like how judges are elected in Texas and the role of court decisions in public policymaking.
Texas has a plural executive system with independently elected executive branch officials, unlike the cabinet system used by the federal government and most other states. This reflects Texas' conservative tradition of limiting any single official's power. Elected positions include the governor, lieutenant governor, attorney general, comptroller, land commissioner, agriculture commissioner, and appointed positions like secretary of state. Various boards and commissions also operate independently to regulate industries and oversee agencies, universities, and occupational licensing. The extensive bureaucracy carries out laws under the direction of these numerous elected and appointed officials.
This document provides an overview of the role and powers of the governor of Texas. It discusses that the governor has limited formal powers according to the state constitution, but also wields informal powers. Some key points made include: the governor can appoint boards and commissions, call special legislative sessions, has veto and line-item veto powers, and plays an important role in shaping policy through leadership of their political party and use of their public platform. The governor's appointment powers and ability to grant clemency are also constrained by the legislature.
This document summarizes the key types and roles of interest groups in Texas politics. It discusses how interest groups are composed of people who share common goals and try to influence policymakers. The main types discussed are business groups, labor groups, professional associations, ethnic groups, and single-issue advocacy organizations. Powerful interest groups in Texas try to sway policymakers through information sharing, lobbying, mobilizing members, overseeing agencies, funding political campaigns, and forming iron triangles between groups, legislators, and agencies.
1. This chapter discusses how governments intervene in markets through price controls and quantity controls, and the unintended consequences that often result from such interventions. It explains how price ceilings and floors can lead to shortages or surpluses and create various inefficiencies, while quantity controls drive a wedge between what buyers pay and sellers receive.
2. Examples of price controls and their effects are provided, such as rent control creating a shortage of apartments in New York and minimum wages potentially leading to unemployment. The chapter also discusses why governments impose such controls despite their predictable problems.
3. In summary, the chapter analyzes the economics of government intervention in markets and how it regularly fails to achieve its intended goals due to
1. This chapter discusses how governments intervene in markets through price controls and quantity controls, and the unintended consequences that often result from such interventions. It explains how price ceilings and floors can lead to shortages or surpluses and create various inefficiencies, while quantity controls drive a wedge between what buyers pay and sellers receive.
2. Specific examples of rent control, minimum wages, agricultural price supports, and fishing quotas are provided to illustrate how different policies work and their typical effects. Black markets that arise in response to controls are also addressed. The chapter aims to explain economists' skepticism of market interventions due to their predictable problems.
Political parties form to win elections by bringing together groups with common goals to control government. The two major US parties, Democrats and Republicans, have a coalitional structure with diverse groups that agree on broad ideas. Parties hold conventions to select leaders and platforms. In Texas, Democrats originally dominated but Republicans grew through conservative national policies and appealing to rural voters. By the 1980s under Reagan, Texas became a true two-party state. Today both parties remain fractured among different ideological factions.
Philippine Edukasyong Pantahanan at Pangkabuhayan (EPP) CurriculumMJDuyan
(𝐓𝐋𝐄 𝟏𝟎𝟎) (𝐋𝐞𝐬𝐬𝐨𝐧 𝟏)-𝐏𝐫𝐞𝐥𝐢𝐦𝐬
𝐃𝐢𝐬𝐜𝐮𝐬𝐬 𝐭𝐡𝐞 𝐄𝐏𝐏 𝐂𝐮𝐫𝐫𝐢𝐜𝐮𝐥𝐮𝐦 𝐢𝐧 𝐭𝐡𝐞 𝐏𝐡𝐢𝐥𝐢𝐩𝐩𝐢𝐧𝐞𝐬:
- Understand the goals and objectives of the Edukasyong Pantahanan at Pangkabuhayan (EPP) curriculum, recognizing its importance in fostering practical life skills and values among students. Students will also be able to identify the key components and subjects covered, such as agriculture, home economics, industrial arts, and information and communication technology.
𝐄𝐱𝐩𝐥𝐚𝐢𝐧 𝐭𝐡𝐞 𝐍𝐚𝐭𝐮𝐫𝐞 𝐚𝐧𝐝 𝐒𝐜𝐨𝐩𝐞 𝐨𝐟 𝐚𝐧 𝐄𝐧𝐭𝐫𝐞𝐩𝐫𝐞𝐧𝐞𝐮𝐫:
-Define entrepreneurship, distinguishing it from general business activities by emphasizing its focus on innovation, risk-taking, and value creation. Students will describe the characteristics and traits of successful entrepreneurs, including their roles and responsibilities, and discuss the broader economic and social impacts of entrepreneurial activities on both local and global scales.
Chapter wise All Notes of First year Basic Civil Engineering.pptxDenish Jangid
Chapter wise All Notes of First year Basic Civil Engineering
Syllabus
Chapter-1
Introduction to objective, scope and outcome the subject
Chapter 2
Introduction: Scope and Specialization of Civil Engineering, Role of civil Engineer in Society, Impact of infrastructural development on economy of country.
Chapter 3
Surveying: Object Principles & Types of Surveying; Site Plans, Plans & Maps; Scales & Unit of different Measurements.
Linear Measurements: Instruments used. Linear Measurement by Tape, Ranging out Survey Lines and overcoming Obstructions; Measurements on sloping ground; Tape corrections, conventional symbols. Angular Measurements: Instruments used; Introduction to Compass Surveying, Bearings and Longitude & Latitude of a Line, Introduction to total station.
Levelling: Instrument used Object of levelling, Methods of levelling in brief, and Contour maps.
Chapter 4
Buildings: Selection of site for Buildings, Layout of Building Plan, Types of buildings, Plinth area, carpet area, floor space index, Introduction to building byelaws, concept of sun light & ventilation. Components of Buildings & their functions, Basic concept of R.C.C., Introduction to types of foundation
Chapter 5
Transportation: Introduction to Transportation Engineering; Traffic and Road Safety: Types and Characteristics of Various Modes of Transportation; Various Road Traffic Signs, Causes of Accidents and Road Safety Measures.
Chapter 6
Environmental Engineering: Environmental Pollution, Environmental Acts and Regulations, Functional Concepts of Ecology, Basics of Species, Biodiversity, Ecosystem, Hydrological Cycle; Chemical Cycles: Carbon, Nitrogen & Phosphorus; Energy Flow in Ecosystems.
Water Pollution: Water Quality standards, Introduction to Treatment & Disposal of Waste Water. Reuse and Saving of Water, Rain Water Harvesting. Solid Waste Management: Classification of Solid Waste, Collection, Transportation and Disposal of Solid. Recycling of Solid Waste: Energy Recovery, Sanitary Landfill, On-Site Sanitation. Air & Noise Pollution: Primary and Secondary air pollutants, Harmful effects of Air Pollution, Control of Air Pollution. . Noise Pollution Harmful Effects of noise pollution, control of noise pollution, Global warming & Climate Change, Ozone depletion, Greenhouse effect
Text Books:
1. Palancharmy, Basic Civil Engineering, McGraw Hill publishers.
2. Satheesh Gopi, Basic Civil Engineering, Pearson Publishers.
3. Ketki Rangwala Dalal, Essentials of Civil Engineering, Charotar Publishing House.
4. BCP, Surveying volume 1
A Visual Guide to 1 Samuel | A Tale of Two HeartsSteve Thomason
These slides walk through the story of 1 Samuel. Samuel is the last judge of Israel. The people reject God and want a king. Saul is anointed as the first king, but he is not a good king. David, the shepherd boy is anointed and Saul is envious of him. David shows honor while Saul continues to self destruct.
Level 3 NCEA - NZ: A Nation In the Making 1872 - 1900 SML.pptHenry Hollis
The History of NZ 1870-1900.
Making of a Nation.
From the NZ Wars to Liberals,
Richard Seddon, George Grey,
Social Laboratory, New Zealand,
Confiscations, Kotahitanga, Kingitanga, Parliament, Suffrage, Repudiation, Economic Change, Agriculture, Gold Mining, Timber, Flax, Sheep, Dairying,
This presentation was provided by Racquel Jemison, Ph.D., Christina MacLaughlin, Ph.D., and Paulomi Majumder. Ph.D., all of the American Chemical Society, for the second session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session Two: 'Expanding Pathways to Publishing Careers,' was held June 13, 2024.
Temple of Asclepius in Thrace. Excavation resultsKrassimira Luka
The temple and the sanctuary around were dedicated to Asklepios Zmidrenus. This name has been known since 1875 when an inscription dedicated to him was discovered in Rome. The inscription is dated in 227 AD and was left by soldiers originating from the city of Philippopolis (modern Plovdiv).
Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
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إضغ بين إيديكم من أقوى الملازم التي صممتها
ملزمة تشريح الجهاز الهيكلي (نظري 3)
💀💀💀💀💀💀💀💀💀💀
تتميز هذهِ الملزمة بعِدة مُميزات :
1- مُترجمة ترجمة تُناسب جميع المستويات
2- تحتوي على 78 رسم توضيحي لكل كلمة موجودة بالملزمة (لكل كلمة !!!!)
#فهم_ماكو_درخ
3- دقة الكتابة والصور عالية جداً جداً جداً
4- هُنالك بعض المعلومات تم توضيحها بشكل تفصيلي جداً (تُعتبر لدى الطالب أو الطالبة بإنها معلومات مُبهمة ومع ذلك تم توضيح هذهِ المعلومات المُبهمة بشكل تفصيلي جداً
5- الملزمة تشرح نفسها ب نفسها بس تكلك تعال اقراني
6- تحتوي الملزمة في اول سلايد على خارطة تتضمن جميع تفرُعات معلومات الجهاز الهيكلي المذكورة في هذهِ الملزمة
واخيراً هذهِ الملزمة حلالٌ عليكم وإتمنى منكم إن تدعولي بالخير والصحة والعافية فقط
كل التوفيق زملائي وزميلاتي ، زميلكم محمد الذهبي 💊💊
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2. WHAT YOU WILL LEARN IN THIS CHAPTER
Why models? Simplified representations of reality—
play a crucial role in economics
Two simple but important models:
production possibility frontier
circular-flow diagram
The difference between positive economics and
normative economics
When economists agree and why they sometimes
disagree
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3. Models in Economics
A model is a simplified representation of a real
situation that is used to better understand real-life
situations.
Create a real but simplified economy
Ex.: Cigarettes in World War II prison camps
Simulate an economy on a computer
Ex.: Tax models, money models…
The “other things equal” assumption means
that all other relevant factors remain unchanged.
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4. Trade-offs: The Production Possibility Frontier
The production possibility frontier (PPF)
illustrates the trade-offs facing an economy that
produces only two goods. It shows the maximum
quantity of one good that can be produced for any
given production of the other.
The PPF improves our understanding of trade-offs
by considering a simplified economy that produces
only two goods by showing this trade-off graphically.
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5. The Production Possibility Frontier
Quantity of coconuts
D
30
Feasible and
efficient
in production
A
15
9
Not
feasible
Feasible but
not efficient
B
C
Production possibility frontier
PPF
0
20
28
40
Quantity of fish
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6. Increasing Opportunity Cost
Quantity of coconuts
35
Producing the first
20 fish . . .
…requires giving up
5 coconuts
But producing
20 more fish . . .
30
A
25
20
…requires giving up
25 more coconuts…
15
10
5
PPF
0
10
20
30
40
50
Quantity of fish
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7. Economic Growth
Quantity of coconuts
Production is can now
The economyinitially at point
Economic growth results in
A outward shift coconuts),
produce more of of the PPF
an(20 fish and 25everything.
it can production
because move to point E (25
possibilities coconuts).
fish and 30 are expanded.
35
E
30
A
25
20
15
10
5
Original
New
PPF
PPF
0
10
20
25
30
40
50
Quantity of fish
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8. Production Possibilities for Two Castaways
(a) Tom’s Production Possibilities
Quantity of coconuts
30
Tom’s consumption
without trade
9
Tom’s
PPF
0
28
40
Quantity of fish
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9. Production Possibilities for Two Castaways
(a) Hank’s Production Possibilities
Quantity of coconuts
20
Hank’s consumption
without trade
8
Hank’s
PPF
0
6
10
Quantity of fish
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10. Tom and Hank’s Opportunity Costs
Tom’s
Opportunity
Cost
Hank’s
Opportunity
Cost
One fish 3/4 coconut
2 coconuts
One
4/3 fish
coconut
1/2 fish
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11. Specialize and Trade
Both castaways are better off when they each
specialize in what they are good at and trade.
It’s a good idea for Tom to catch the fish for both of
them, because his opportunity cost of a fish in terms
of coconuts not gathered is only 3/4 of a coconut,
versus 2 coconuts for Hank.
Correspondingly, it’s a good idea for Hank to gather
coconuts for the both of them.
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12. Comparative Advantage and Gains from Trade
(a) Tom’s Production and Consumption
Quantity of coconuts
30
(b) Hank’s Production and Consumption
Quantity of coconuts
Tom’s consumption
without trade
Hank’s production
with trade
Tom’s consumption
with trade
Tom’s production
with trade
10
9
20
Hank’s consumption
with trade
Hank’s consumption
without trade
10
8
Hank's
PPF
Tom's
PPF
0
28 30
40 Quantity of fish
0
6 10
Quantity of fish
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13. How the Castaways Gain from Trade
Both Tom and Hank experience gains from trade:
Tom’s consumption of fish increases by two, and
his consumption of coconuts increases by one.
Hank’s consumption of fish increases by four, and
his consumption of coconuts increases by two.
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14. Comparative vs. Absolute Advantage
An individual has a comparative advantage in
producing a good or service if the opportunity cost
of producing the good is lower for that individual
than for other people.
An individual has an absolute advantage in an
activity if he or she can do it better than other
people. Having an absolute advantage is not the
same thing as having a comparative advantage.
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15. Tom vs. Hank – Absolute vs. Comparative
Tom has an absolute advantage in both activities:
he can produce more output with a given amount of
input (in this case, his time) than Hank.
But we’ve just seen that Tom can indeed benefit
from a deal with Hank because comparative, not
absolute, advantage is the basis for mutual gain.
So Hank, despite his absolute disadvantage, even
in coconuts, has a comparative advantage in
coconut gathering.
Meanwhile Tom, who can use his time better by
catching fish, has a comparative disadvantage in
coconut-gathering.
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16. Comparative Advantage and International Trade
(a) The U.S. Production Possibilities Frontier
Quantity of aircraft
(b) Canadian Production Possibilities Frontier
Quantity of aircraft
3,000
U.S. consumption
without trade
U.S. consumption
with trade
1,500
Canadian production
with trade
Canadian
consumption
without trade
2,000
1,500
U.S.
production
with trade
1,000
Canadian
consumption
with trade
U.S.
PPF
0
1
2
3
Quantity of pork (millions of tons)
Canadian
PPF
0
0.5
1
1.5
Quantity of pork (millions of tons)
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17. Comparative Advantage and International Trade
Just like the example of Tom and Hank, the U.S.
and Canada can both achieve mutual gains from
trade.
If the U.S. concentrates on producing pork and
ships some of its output to Canada, while Canada
concentrates on aircraft and ships some of its output
to the U.S., both countries can consume more than
if they insisted on being self-sufficient.
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18. PITFALLS
Misunderstanding Comparative Advantage
A common mistake is to confuse comparative
advantage with absolute advantage.
Ex.: U.S. vs. Japan in 1980s:
Commentators: “U.S. might soon have no
comparative advantage in anything”
Wrong! They meant “absolute advantage”
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19. Transactions: The Circular-Flow Diagram
Trade takes the form of barter when people directly
exchange goods or services they have for goods or
services they want.
The circular-flow diagram is a model that
represents the transactions in an economy by flows
around a circle.
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21. Circular-Flow of Economic Activities
A household is a person or a group of people that
share their income.
A firm is an organization that produces goods and
services for sale.
Firms sell goods and services that they produce to
households in markets for goods and services.
Firms buy the resources they need to produce—
factors of production—in factor markets.
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22. Circular-Flow of Economic Activities
Ultimately, factor markets determine the economy’s
income distribution, how total income is divided
among the owners of the various factors of
production.
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23. Using Models
Positive economics is the branch of economic
analysis that describes the way the economy
actually works.
Normative economics makes prescriptions about
the way the economy should work.
A forecast is a simple prediction of the future.
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24. Using Models
Economists can determine correct answers for
positive questions, but typically not for normative
questions, which involve value judgments.
The exceptions are when policies designed to
achieve a certain prescription can be clearly ranked
in terms of efficiency.
It is important to understand that economists don’t
use complex models to show “how clever they are,”
but rather because they are “not clever enough” to
analyze the real world as it is.
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25. When and Why Economists Disagree
There are two main reasons economists disagree:
Which simplifications to make in a model
Values
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26. SUMMARY
1. Almost all economics is based on models. An important
assumption in economic models is the other things equal
assumption, which allows analysis of the effect of a
change in one factor by holding all other relevant factors
unchanged.
2. One important economic model is the production
possibility frontier. It illustrates: opportunity cost,
efficiency, and economic growth. There are two basic
sources of growth: an increase in factors of production,
resources such as land, labor, capital, and human capital,
inputs that are not used up in production, and improved
technology.
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27. SUMMARY
3. Another important model is comparative advantage, which
explains the source of gains from trade between individuals
and countries. Everyone has a comparative advantage in
something. This is often confused with absolute
advantage, an ability to produce a particular good or service
better than anyone else.
4. In the simplest economies, people barter or trade goods
and services for one another—rather than trade them for
money, as in a modern economy. The circular-flow
diagram represents transactions within the economy as
flows of goods, services, and money between households
and firms. These transactions occur in markets for goods
and services and factor markets.
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28. SUMMARY
5. Economists use economic models both for positive
economics, which describes how the economy works, and
for normative economics, which prescribes how the
economy should work. Positive economics often involves
making forecasts. Economists can determine correct
answers for positive questions, but typically not for
normative questions, which involve value judgments.
6. There are two main reasons economists disagree. One,
they may disagree about which simplifications to make in a
model. Two, economists may disagree—like everyone else
—about values.
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29. The End of Chapter 2
Coming attraction
Chapter 3:
Supply and Demand
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Editor's Notes
Figure Caption:
Figure 2.1 - The Production Possibility Frontier
The production possibility frontier illustrates the trade-offs facing an economy that produces two goods. It shows the maximum quantity of one good that can be produced given the quantity of the other good produced. Here, the maximum quantity of coconuts that Tom can gather depends on the quantity of fish he catches, and vice versa. His feasible production is shown by the area inside or on the curve. Production at point C is feasible but not efficient. Points A and B are feasible and efficient in production, but point D is not feasible.
Figure Caption:
Figure 2.2 - Increasing Opportunity Cost
The bowed-out shape of the production possibility frontier reflects increasing opportunity cost. In this example, to produce the first 20 fish, Tom must give up 5 coconuts. But to produce an additional 20 fish, he must give up 25 more coconuts.
Figure 2.3 - Economic Growth
Economic growth results in an outward shift of the production possibility frontier because production possibilities are expanded. The economy can now produce more of everything. For example, if production is initially at point A (20 fish and 25 coconuts), it could move to point E (25 fish and 30 coconuts).
Figure Caption:
Figure 2.4 - Production Possibilities for Two Castaways
Here, each of the two castaways has a constant opportunity cost of fish and a straight-line production possibility frontier. In Tom’s case, each fish always has an opportunity cost of 3⁄4 of a coconut.
Figure Caption:
Figure 2.4 - Production Possibilities for Two Castaways
Here, each of the two castaways has a constant opportunity cost of fish and a straight-line production possibility frontier. In Hank’s case, each fish always has an opportunity cost of 2 coconuts.
Figure Caption:
Figure 2-5: Comparative Advantage and Gains from Trade By specializing and trading, the two castaways can produce
By specializing and trading, the two castaways can produce and consume more of both goods. Tom specializes in catching fish, his comparative advantage, and Hank— who has an absolute disadvantage in both goods but a comparative advantage in coconuts—specializes in gathering coconuts. The result is that each castaway can consume more of both goods than either could without trade.
Figure Caption:
Figure 2.6: Comparative Advantage and International Trade
In this hypothetical example, Canada and the United States produce only two goods: pork and aircraft. Aircraft are measured on the vertical axis and pork on the horizontal axis. Panel (a) shows the U.S. production possibility frontier. It is relatively flat, implying that the United States has a comparative advantage in pork production. Panel (b) shows the Canadian production possibility frontier. It is relatively steep, implying that Canada has a comparative advantage in aircraft production. Just like two individuals, both countries gain from specialization and trade.
Figure Caption:
Figure 2.7: The Circular-Flow Diagram
This diagram represents the flows of money and goods and services in the economy. In the markets for goods and services, households purchase goods and services from firms, generating a flow of money to the firms and a flow of goods and services to the households. The money flows back to households as firms purchase factors of production from the households in factor markets.