Draw this PPF graph and
answer the following question:
Warm Up
A
B
C
D
e
f
Infinity
Gauntlets (in
millions)
14
12
9
5
0
0
Sharma (in
millions of lbs)
0
2
4
6
8
10
Does this PPF
represent constant
opportunity cost or the
law of increasing
opportunity cost?
Explain why
2 more practice problems
For each table:
– graph the PPF
– list the opportunity
cost a-b, b-c, c-d,
d-e
– Explain if the
opportunity cost is
constant or
increasing
A
B
C
D
E
Loaves
of
bread
12
10
7
4
0
Bran
muffins
0
35
63
84
100
A
B
C
D
E
Guns
(millions)
10
9
7
4
0
Butter
(millions of
lbs)
0
1
2
3
4
Econ Systems and Theories
Traditional Economies
Def: Economic
Questions answered
by custom
Predominately
Agricultural
Developing or “3rd
World”
Trade and barter
oriented
Low GDP & PCI (per
capita income = avg.
inc.)
Adam Smith
18th century Scottish economist
Published The Wealth of Nations
in 1776
Explained the workings of the
free market within capitalist
economies
Invisible hand of the market
Adam Smith (cont.)
Laissez-faire - Government stays out of
business practices “hands off” to let the
market place determine production,
consumption and distribution.
Individual freedom and choice
emphasized (if everyone seeks their own
self interest, it will meet societies needs)
“It is not from the benevolence of the
butcher, the brewer, or the baker that we
expect our dinner, but from their regard to
their own interest”
– Adam Smith, The Wealth of Nations
Karl Marx
19th century German
economist
Author of Communist
Manifesto and Das
Kapital
– Government should
control economy and
distribute goods and
services to the people
One of the Founders of
revolutionary socialism
and communism
Quotes from Marx the
Communist Manifesto
• “The history of all hitherto existing
society is the history of class
struggles.
• “Let the ruling classes tremble at a
Communistic revolution. The
proletarians have nothing to lose but
their chains. They have a world to
win.
Workingmen of all countries unite!”
• “In proportion therefore, as the
repulsiveness of the work increases,
the wage decreases.”
• “The theory of Communism may be
summed in a single sentence: The
abolition of private property.”
Command Economies
Def: Economic
questions answered by
the government
Very little economic
choice
No private ownership
Communism, Socialism
Old Soviet Union, old
Communist China,
Cuba and North Korea
Market Economies
Economic questions
answered by
producers and
consumers
Limited government
involvement
Private property rights
Wide variety of
choices and products
Capitalism
U.S., Japan
Mixed Economy
Government involvement
and ownership and control
of property, of decision
making, and companies.
Government control of
business
Social “safety net” for
people
Socialism + Captialism
Common in Europe, Latin
America, and Africa