ECON 2005 Week 2

ECON 2005 Week 2 - ECON 2005: Principles of Economics...

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ECON 2005: Principles of Economics (Microeconomics) Week 2 1
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Graphing u Slope calculation u Steepness of a Line u If one line has a slope of 5 and another a slope of 2, which line is steeper? u Equation of a Line 2
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Positive and Negative Slopes 3
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Alternate Slopes for Straight Lines 4 No relation: zero slope 0 x 20 10 10 20 y Slope = 0/10 = 0 No relation: infinite slope 0 x 10 10 20 y 10 Slope = 10/0 = 10
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Slope Varies Along a Curve 5 The slope of a curved line varies from point to point At point a , the slope of the curve is equal to the slope of the tangent A At point b , the slope of the curve is equal to the slope of the tangent B 0 40 30 20 10 x 30 20 10 40 y a b B A
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Slope Varies Along a Curve 6
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Chapter 2 Economic Tools and Economic Systems 7
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Absolute Advantage u A producer of a good or service has absolute advantage over another producer when it is able to produce that good or service using fewer resources than the other producer requires. 8
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Absolute Advantage u In the presence of two producers… 1. Produces greater output in a given amount of time, or 2. Produces faster (requires less time) given a set level of output 9
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Determining Absolute Advantage 10 pick berries (qt.) ears of corn (ea.) You 3 10 Roommate 6 15 Per ½ Hour pick berries (qt.) ears of corn (ea.) You 10 minutes 3 minutes Roommate 5 minutes 2 minutes Per Each
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Law of Comparative Advantage u The Law of Comparative Advantage states that the producer with the lowest opportunity cost should produce that product. 11
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Law of Comparative Advantage u You and your roommate enjoy corn and berries, but only have 30 minutes each week to pick these crops u Assume you each only eat 5 ears of corn each week u You both want to maximize your 12
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pick berries (qt.) ears of corn (ea.) You Roommate Per ½ Hour Determining Absolute Advantage u Calculate opportunity cost for each activity… 13 pick berries (qt.) ears of corn (ea.) You 3 10 Roommate 6 15 Per ½ Hour
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Law of Comparative Advantage u Are you and your roommate better off through specialization and trade? u With two producers and two tasks, can one producer have comparative advantage in both tasks? 14
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Advantage u Are you and your roommate better off through specialization and trade? u
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This note was uploaded on 04/08/2012 for the course ECON 2005 at Virginia Tech.

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ECON 2005 Week 2 - ECON 2005: Principles of Economics...

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