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201C1ol - goods and services in order to get more of a...

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CHAPTER 1 – ECONOMICS: THE CORE ISSUES - SCARCITY--our main problem; limited resources for unlimited wants/desires - 4 BASIC FACTORS OF PRODUCTION: land - oil, water, air, minerals (not mineral rights) labor - skills/work to produce goods/services capital - items used to produce other goods (fishing nets, blast furnaces) entrepreneurship - how you use your resources - OPPORTUNITY COSTS--what is given up in order to get something else (you being in class today, could be working, sleeping, etc.) if we can produce 1 car or 8 riding mowers: the "OC" of 1 car is 8 mowers or the "OC" of 1 mower is 1/8 of a car (.125) -PRODUCTION POSSIBILITIES CURVE--shows the possible output combinations for two goods -if it is curved (bowed, bent) it reflects increasing opportunity costs as we move along it -the law of increasing opportunity cost states that we must give up ever increasing quantities of other
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Unformatted text preview: goods and services in order to get more of a particular good-if it is a straight line it reflects constant opportunity costs POINTS IN RELATION TO THE CURVE-on it = maximum efficiency-inside it = inefficiency (unemployment or underemployment) unemployment = not working but want to underemployment = college grad carrying bricks-outside it = unattainable with existing resources and technology THE ENTIRE CURVE MAY SHIFT-outward with more resources and better technology-inward if a disease would wipe out 20 million people MARKET MECHANISM--use of prices and sales to signal market desires (Mazda Miata, Play Station 2) MACROECONOMICS VS. MICROECONOMICS-macro = the "big picture," the overall economy (inflation or unemployment)-micro = focuses on individual firms/businesses CETERIS PARIBUS-holding everything else constant; nothing else changes...
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