2 - 1 copyright mcgraw-hill/irwin, 2005 the foundation of economics employment and efficiency...
TRANSCRIPT
![Page 1: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/1.jpg)
2 - 1Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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The Economizing
Problem2C H A P T E R
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2 - 2Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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THE FOUNDATION OF ECONOMICS
SOCIETY HAS VIRTUALLYUNLIMITED WANTS...
![Page 3: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/3.jpg)
2 - 3Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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BUT LIMITED OR SCARCEPRODUCTIVE RESOURCES!
SOCIETY HAS VIRTUALLYUNLIMITED WANTS...
THE FOUNDATION OF ECONOMICS
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2 - 4Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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GOODS & SERVICES PROVIDE...
UTILITY
![Page 5: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/5.jpg)
2 - 5Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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LUXURIES
GOODS & SERVICES PROVIDE...
UTILITY
![Page 6: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/6.jpg)
2 - 6Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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LUXURIES vs. NECESSITIES
GOODS & SERVICES PROVIDE...
UTILITY
![Page 7: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/7.jpg)
2 - 7Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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PROPERTY RESOURCES
LAND
SCARCE RESOURCESECONOMIC RESOURCES
![Page 8: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/8.jpg)
2 - 8Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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PROPERTY RESOURCES
LAND
CAPITAL
SCARCE RESOURCESECONOMIC RESOURCES
![Page 9: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/9.jpg)
2 - 9Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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PROPERTY RESOURCES
LAND
CAPITAL
SCARCE RESOURCESECONOMIC RESOURCES
Notes...
INVESTMENT
FINANCIALCAPITAL
REALCAPITAL
![Page 10: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/10.jpg)
2 - 10Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
PROPERTY RESOURCES
LAND
CAPITAL
HUMAN RESOURCES
SCARCE RESOURCESECONOMIC RESOURCES
![Page 11: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/11.jpg)
2 - 11Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
PROPERTY RESOURCES
LAND
CAPITAL
HUMAN RESOURCES
LABOR
SCARCE RESOURCESECONOMIC RESOURCES
![Page 12: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/12.jpg)
2 - 12Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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PROPERTY RESOURCES
LAND
CAPITAL
HUMAN RESOURCES
LABOR
ENTREPRENEURIAL ABILITY
SCARCE RESOURCESECONOMIC RESOURCES
Also knownas the
InputFactors ofProduction
![Page 13: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/13.jpg)
2 - 13Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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ENTREPRENEURIAL ABILITY
Takes The InitiativeMakes Strategic Business Decisions Innovator
The Risk Bearer
![Page 14: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/14.jpg)
2 - 14Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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RESOURCE PAYMENTS
RENTALINCOME
INTERESTINCOME
WAGESPROFIT &
LOSS
PROPERTY RESOURCES
LAND
CAPITAL
HUMAN RESOURCES
LABOR
ENTREPRENEUR
![Page 15: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/15.jpg)
2 - 15Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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Productive Efficiency
Full Employment
Full Production
Allocative Efficiency
ECONOMICS & EFFICIENCY
![Page 16: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/16.jpg)
2 - 16Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
PRODUCTION POSSIBILITIES
Assumes...Full Employment
and ProductiveEfficiency
Fixed ResourcesFixed TechnologyTwo Goods
for example...
![Page 17: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/17.jpg)
2 - 17Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
PRODUCTION POSSIBILITIES
Assumes...Full Employment
and ProductiveEfficiency
Fixed ResourcesFixed TechnologyTwo Goods
for example...
PIZZA
A Consumer Good
![Page 18: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/18.jpg)
2 - 18Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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Two Goods
Fixed ResourcesFixed Technology
Assumes...Full Employment
and ProductiveEfficiency
PRODUCTION POSSIBILITIES
for example...
Robots
A Capital Good
![Page 19: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/19.jpg)
2 - 19Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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Using all of our resources, to get some pizza, we must give
up some robots!for example...
What if we could only produce ...10,000 Robots
or
400,000 Pizzas
PRODUCTION POSSIBILITIES
![Page 20: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/20.jpg)
2 - 20Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PIZZA 0 1 2 3 4(in hundred thousands)
ROBOTS 10 9 7 4 0(in thousands)
in table form
PRODUCTION POSSIBILITIES
![Page 21: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/21.jpg)
2 - 21Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PIZZA 0 1 2 3 4(in hundred thousands)
ROBOTS 10 9 7 4 0(in thousands)
in table form
graphical formR
ob
ots
(th
ou
san
ds)
Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
![Page 22: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/22.jpg)
2 - 22Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PIZZA 0 1 2 3 4(in hundred thousands)
ROBOTS 10 9 7 4 0(in thousands)
in table form
graphical formR
ob
ots
(th
ou
san
ds)
Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
![Page 23: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/23.jpg)
2 - 23Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PIZZA 0 1 2 3 4(in hundred thousands)
ROBOTS 10 9 7 4 0(in thousands)
in table form
graphical formR
ob
ots
(th
ou
san
ds)
Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
![Page 24: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/24.jpg)
2 - 24Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PIZZA 0 1 2 3 4(in hundred thousands)
ROBOTS 10 9 7 4 0(in thousands)
in table form
graphical formR
ob
ots
(th
ou
san
ds)
Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
![Page 25: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/25.jpg)
2 - 25Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PIZZA 0 1 2 3 4(in hundred thousands)
ROBOTS 10 9 7 4 0(in thousands)
in table form
graphical formR
ob
ots
(th
ou
san
ds)
Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
![Page 26: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/26.jpg)
2 - 26Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
PIZZA 0 1 2 3 4(in hundred thousands)
ROBOTS 10 9 7 4 0(in thousands)
in table form
graphical formR
ob
ots
(th
ou
san
ds)
Pizzas (hundred thousands)
PRODUCTION POSSIBILITIES
![Page 27: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/27.jpg)
2 - 27Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
At any point in time, a full-employment, full-production economy must sacrifice some of product X to obtain more of product Y.
PRODUCTION POSSIBILITIESLimited Resources meansa limited output...
![Page 28: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/28.jpg)
2 - 28Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Q
Ro
bo
ts (t
ho
usa
nd
s)
Pizzas (hundred thousands)
1413121110 9 8 7 6 5 4 3 2 1
1 2 3 4 5 6 7 8
A B
C
D
E
W
Attainablebut
Inefficient
Unattainable
Attainable& Efficient
PRODUCTION POSSIBILITIES
![Page 29: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/29.jpg)
2 - 29Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Q
Q
Ro
bo
ts (t
ho
usa
nd
s)
Pizzas (hundred thousands)
1413121110 9 8 7 6 5 4 3 2 1
1 2 3 4 5 6 7 8
A B
C
D
E
W
Attainablebut
Inefficient
Unattainable
Attainable& Efficient
PRODUCTION POSSIBILITIES
Notes...
The amount of other products that must beforgone or sacrificed to obtain 1 unit of a specific product is called the opportunity cost of that good.
LAW OF INCREASINGOPPORTUNITY COSTS
![Page 30: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/30.jpg)
2 - 30Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Ro
bo
ts
Ro
bo
ts (t
ho
usa
nd
s)(t
ho
usa
nd
s)
Pizzas Pizzas (hundred thousands)(hundred thousands)
14141313121211111010 99 88 77 66 55 44 33 22 11
1 2 3 4 5 6 7 81 2 3 4 5 6 7 8
A B
C
D
E
W
Attainablebut
Inefficient
UnattainableUnattainable
AttainableAttainable& Efficient& Efficient
PRODUCTION POSSIBILITIES
Notes...LAW OF INCREASINGOPPORTUNITY COSTS
A graph of the production possibilities curve will be CONCAVE - bowed out from the origin.
Economic resources arenot completely adapt-able to other uses.
![Page 31: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/31.jpg)
2 - 31Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
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P
Q
Mar
gin
al B
enef
it &
Co
st
Quantity of Pizzas
$15
10
5
1 2 3
PRODUCTION POSSIBILITIES
MC
MB
Allocative Efficiency: MB=MC
MB=MC
![Page 32: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/32.jpg)
2 - 32Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Q
Q
Ro
bo
ts (t
ho
usa
nd
s)
Pizzas (hundred thousands)
1413121110 9 8 7 6 5 4 3 2 1
1 2 3 4 5 6 7 8
U
Unemployment &Underemployment Shown by Point U
More of either orboth is possible
PRODUCTION POSSIBILITIES
![Page 33: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/33.jpg)
2 - 33Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Q
Q
Ro
bo
ts (t
ho
usa
nd
s)
Pizzas (hundred thousands)
1413121110 9 8 7 6 5 4 3 2 1
1 2 3 4 5 6 7 8
U
Unemployment &Underemployment Shown by Point U
More of either orboth is possible
PRODUCTION POSSIBILITIES
Notes...Economic Growth
The ability to producea larger total output -a rightward shift of the production possibilities curve caused by...
![Page 34: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/34.jpg)
2 - 34Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Q
Q
Ro
bo
ts (t
ho
usa
nd
s)
Pizzas (hundred thousands)
1413121110 9 8 7 6 5 4 3 2 1
1 2 3 4 5 6 7 8
U
Unemployment &Underemployment Shown by Point U
More of either orboth is possible
PRODUCTION POSSIBILITIES
Notes...Economic Growth1 – Increase in
resource supplies
2 – Better resource quality
3 – Technological advances
![Page 35: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/35.jpg)
2 - 35Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Economic Growth
Q
Q
Ro
bo
ts (t
ho
usa
nd
s)
Pizzas (hundred thousands)
1413121110 9 8 7 6 5 4 3 2 1
1 2 3 4 5 6 7 8
A’
B’
C’
D’
E’
PRODUCTION POSSIBILITIES
![Page 36: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/36.jpg)
2 - 36Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
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Two Examples of Economic GrowthALTA - FAVORS
PRESENT GOODS
Goods for the Present
Go
od
s fo
r th
e F
utu
reG
oo
ds
for
the
Fu
ture CURRENT
CURVE
FUTURECURVE
CONSUMPTION
PRODUCTION POSSIBILITIES
Alta
![Page 37: 2 - 1 Copyright McGraw-Hill/Irwin, 2005 The Foundation of Economics Employment and Efficiency Unemployment, Growth, and the Future Economic Systems The](https://reader035.vdocuments.site/reader035/viewer/2022062409/5697bfc11a28abf838ca4662/html5/thumbnails/37.jpg)
2 - 37Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
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Two Examples of Economic GrowthALTA - FAVORS
PRESENT GOODSZORN - FAVORSFUTURE GOODS
Goods for the Present
Go
od
s fo
r th
e F
utu
re CURRENTCURVE
FUTURECURVE
CONSUMPTION
Goods for the Present
Go
od
s fo
r th
e F
utu
re
FUTURECURVE
CONSUMPTION
CURRENTCURVE
PRODUCTION POSSIBILITIES
Alta Zorn
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2 - 38Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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EndEndShowShow
Applications...• Unemployment and
Productive Inefficiency
PRODUCTION POSSIBILITIES
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2 - 39Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Applications...• Unemployment and
Productive Inefficiency• Tradeoffs and
Opportunity Costs
PRODUCTION POSSIBILITIES
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2 - 40Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
Applications...• Unemployment and
Productive Inefficiency• Tradeoffs and
Opportunity Costs• Shifts in the Production
Possibilities Curves
PRODUCTION POSSIBILITIES
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2 - 41Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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ECONOMIC SYSTEMS
THE MARKET SYSTEMPure Capitalism Laissez-faire
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2 - 42Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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ECONOMIC SYSTEMS
THE MARKET SYSTEMPure Capitalism Laissez-faire
THE COMMAND SYSTEMSocialismCommunism
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2 - 43Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
CIRCULAR FLOW MODEL
BUSINESSES HOUSEHOLDS
RESOURCEMARKET
PRODUCTMARKET
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2 - 44Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
BUSINESSES HOUSEHOLDS
RESOURCEMARKET
RESOURCES INPUTS
PRODUCTMARKET
CIRCULAR FLOW MODEL
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2 - 45Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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BUSINESSES HOUSEHOLDS
RESOURCEMARKET
RESOURCES INPUTS
$ COSTS $ INCOMES
GOODS &GOODS &SERVICESSERVICES
GOODS &GOODS &SERVICESSERVICES
PRODUCTMARKET
CIRCULAR FLOW MODEL
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2 - 46Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
BUSINESSES HOUSEHOLDS
RESOURCEMARKET
RESOURCES INPUTS
$ COSTS $ INCOMES
PRODUCTMARKET
GOODS &SERVICES
GOODS &SERVICES
CIRCULAR FLOW MODEL
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2 - 47Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
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EndEndShowShow
BUSINESSES HOUSEHOLDS
RESOURCEMARKET
RESOURCES INPUTS
$ COSTS $ INCOMES
PRODUCTMARKET
GOODS &SERVICES
GOODS &SERVICES
$ CONSUMPTION$ REVENUE
CIRCULAR FLOW MODEL
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2 - 48Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
PreviousSlide
NextSlide
EndEndShowShow
CIRCULAR FLOW MODEL
BUSINESSES HOUSEHOLDS
RESOURCEMARKET
RESOURCES INPUTS
$ COSTS $ INCOMES
PRODUCTMARKET
GOODS &SERVICES
GOODS &SERVICES
$ CONSUMPTION$ REVENUE
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economizing problemeconomic resourceslandcapitalinvestmentlaborentrepreneurial abilityfactors of productionfull employmentfull productionproductive efficiencyallocative efficiencyconsumer goodscapital goods
production possibilities tableproduction possibilities curveopportunity costlaw of increasing opportunity costseconomic growtheconomic systemmarket systemcapitalismcommand system resource marketproduct marketcircular flow model
Copyright McGraw-Hill/Irwin, 2005 BACK END
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2 - 50Copyright McGraw-Hill/Irwin, 2005
The Foundation of Economics
Employment and Efficiency
Unemployment, Growth, and the Future
Economic Systems
The Circular Flow Model
Key Terms
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INDIVIDUAL MARKETS:
DEMAND & SUPPLY
Chapter 3
Coming Soon…