What is Economics?
Where on a production possibilities curve is the economy working below its most efficient production levels?
Below the line of the graph.
Why does opportunity cost vary?
We all have different alternatives that vary among us.
Goods
books, cars, and clothes
Human Capital
knowledge gained after learning a new computer skill
How does an opportunity cost differ from a trade-off?
An opportunity cost includes you giving up a desirable alternative. A trade-off is just the decision between 2 alternatives and you making the most important.
Scarcity
Forces people to decide what is most important
Services
what doctors and bankers provide
Underutilization
When the economy works inefficiently
Three pieces of information provided by a production possibilities curve are...
Where the economy would be efficient, underutilized, and unattainable
Production Possibilities Curve
a graph that shows alternatives ways to use and economy's productive resources
Trade-off
the decision to get a job instead of taking a class
How does thinking at the margin - also called cost/benefit analysis - change the decision-making process?
It makes a process in which you compare what you will sacrifice and gain by a specific action.
You decide to spend Saturday raking your neighbor's leaves for pay. Describe the opportunity cost of that decision.
I might want to go downtown with my friends, but instead decided to rake to rake my neighbor's leaves.
Explain how a teacher provides a service
A teacher teaches and by doing so the students learn.
What are "guns or butter" decisions?
"guns"- should a nation produce more military goods "butter"- or consumer goods
Explain why Mary feels that the time available to study for her test is an example of scarcity.
Mary most likely wants to do other things instead of studying but doesn't have that time available.
Where on a production possibilities cure is the economy working at its most efficient production levels?
On the line of the graph.
Where on a production possibilities curve are the categories or specific goods to be compared shown?
On the x-axis and y-axis
Why do decisions involve trade-offs?
One of the rejected alternatives is more desirable than the rest of the options.
Who makes trade-offs?
The government, presidents, and any person that has to decide over one course of action over another.
What could cause a production possibilities frontier to shift to the right?
The growth of the economy.
What does thinking at the margin help compare?
The process of deciding how much more or less to do.
Efficiency
What the "Production possibilities frontier" shows
