ECS 10203 - Ch. 2 (The Economizing Problem)-2

ECS 10203 - Ch. 2 (The Economizing Problem)-2 - Learning...

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Learning Objectives: Students will thoroughly and completely explain: The 4 basic input factors of production The individual’s economizing problem Society’s economizing problem The circular flow model
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The Foundations of Economics SOCIETY HAS VIRTUALLY UNLIMITED WANTS... The economic wants of Citizens Firms Governments BUT LIMITED OR SCARCE PRODUCTIVE RESOURCES!
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Resource Payments RENTAL INCOME INTEREST INCOME WAGES PROFIT & LOSS LAND CAPITAL LABOR ENTREPRENEUR Scarce Resources: Economic Resources
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The Individual’s Economizing Problem Characteristics: Limited income Unlimited wants A budget line – aka budget constraint Tradeoffs & opportunity costs Make best choice possible What happens when there is a change in income?
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Budget Line (constraint) for the Individual 6 5 4 3 2 1 0 0 2 4 6 8 10 12 DVDs $20 Books $10 12 10 8 6 4 2 0 2 4 6 8 10 12 14 $120 Budget Income = $120 P dvd = $20 = 6 Income = $120 P b = $10 = 12 Attainable Unattainable Quantity of Paperback Books Quantity of DVDs 1-6
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Society’s Economizing Problem Introducing the Production Possibility Model. A Production Possibilities Model illustrates the tradeoffs and output that are possible given a limited amount of input. It is important to understand because it can help display which options might allow a country to use their resources in the most efficient way possible.
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Key Concepts of the model Full Employment the use of all available resources Full production – all employed resources are used so they provide the maximum satisfaction of our economic wants.
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