Feb 1 First Model.pdf - Introduction to Macroeconomics What...

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Introduction to Macroeconomics
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2 What is this?
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3 How about this?
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4 Models § Simplifications of reality § Include essential elements § Exclude non-essential elements
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Models Process of simplifying is a strength, not a weakness . Why? 5
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Our First Model
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Modeling Opportunity Cost Assume two producers … Gilligan MaryAnn
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Modeling Opportunity Cost Assume two productive activities … Gathering Coconuts Catching Fish
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Modeling Opportunity Cost Maximum Output Coconuts Fish Gilligan MaryAnn
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Gilligan’s Production Gilligan has 50 hours each week to spend on productive activities. It takes him 30 minutes to gather each coconut. It takes him 15 minutes to catch each fish.
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What is the maximum number of coconuts Gilligan can gather?
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Modeling Opportunity Cost Maximum Output Coconuts Fish Gilligan 100 MaryAnn
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What is the maximum number of fish Gilligan can catch?
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Modeling Opportunity Cost Maximum Output Coconuts Fish Gilligan 100 200 MaryAnn
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MaryAnn’s Production MaryAnn spends 80 hours each week on productive activities.
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