Opportunity Cost
Tony is really good with building technology. He wants
to sell his TV sets and computers to make some extra
money. But only has an hour to build (Tony was an
eagle scout in high school and is somehow able to
build this all in an hour, he’s amazing). He can sell
the TV set for $5 per set and he can make $50 off of
each computer. What opportunity costs will he have to
make to generate the highest revenue? How many of
each product should Tony sell?
Possibilities: 1: $175, 2: $215, 3: $250, 4:
$300, 5: $250 ----- Possibility 4 (20 TVs and 4
Computers) is the best
Economic Growth (Production Possibility
Frontier)
Reasons an economy would experience growth:
1. Factors of Production
2. Technology
Say Tony makes bank from his first week as a tech
salesman and invests in more factors of production.
The store he buys technology parts from has also just
stocked new state-of-the-art pieces that help Tony
build even faster.
Which direction will his Production Possibility
Frontier shift?
Outwards
Key Terms: Chapter 1
1. An economy is a system for coordinating society’s productive
activities.
2. A market economy is an economy in which decisions about
production and consumption are made by individual producers
and consumers.
3. The invisible hand refers to the way in which the individual
pursuit of self-interest can lead to good results for society as a
whole.
4. Economics is the social sciences that studies the production,
distribution, and consumption of goods and services
5. When the individual pursuit of self-interest leads to bad results
for society as a whole, there is market failure.
6. A recession is a downturn in the economy.
7. Microeconomics is the branch of economics that studies how
people make decisions and how these decisions interact.
8. Economic growth is the growing ability of the economy to
produce goods and services.
9. Macroeconomics is the branch of economics that is concerned
with overall ups and downs in the economy.
10.
The real cost of an item is its opportunity cost: what you
must give up in order to get it.
11.
Decisions about whether to do a bit more or a bit less of
an activity are marginal decisions. The study of such decisions is
known as marginal analysis.
12.
Factors of production are resources used to produce goods
and services.
13.
Technology is the technical means for producing goods and
services.
14.
A resource is anything that can be used to produce
something else.
15.
Resources are scarce -- not enough of the resources are
available to satisfy all the various ways a society wants to use
them.
Market failure, economic growth, scarce, opportunity cost,
market economy, macroeconomics, marginal decisions,
invisible hand, market economy, resource, marginal
analysis, economics, recession, microeconomics, factors of
production, technology