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The Fundamentals of

Economics Societys Technological Possibilities

Inputs & Outputs

Factos of Poduction

Production Possibility Frontier

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Indi"iduals Economi#ing Poblem

$imited Income %nlimited ants

' (udget $ine

'ttainable and %nattainable)ombinations

Tadeoffs & Oppotunity )osts

)hoice

Income )hange

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Indi"iduals Economi#ing Poblem

6

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DVDs$20

Books$10

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Societys Economi#ing Poblem

Scace ,esouces ,esouce )ategoies $and

$abo

)apital In"estment

Entepeneuial 'bility

Factos of Poduction

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Poduction Possibilities .odel

Full Employment

Fi/ed ,esouces

Fi/ed Technology

T0o oods

)onsume oods 2Pi##as3 )apital oods 2Industial ,obots3

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Poduction Possibilities .odel

Poduction Possibilities Table

'y(e o& Product

Pi))#s2in hunded thousands3

Industri#l *obots2in thousands3

Production "ltern#ti+es

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10 . / 4 0

0 1 2 3 4

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7/21/2019 Chapter 1 Samuelson 18e PPF

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Poduction Possibilities .odel

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7/21/2019 Chapter 1 Samuelson 18e PPF

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Poduction Possibilities )u"e

7/21/2019 Chapter 1 Samuelson 18e PPF

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Pi))#s

Industri#l*ob

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Poduction Possibilities )u"e

7/21/2019 Chapter 1 Samuelson 18e PPF

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%nemployment o0th and the

Futue

' o0ing Economy Economic o0th

Inceasing ,esouce Supplies

Inceasing ,esouce 9uality

Technological 'd"ances

7/21/2019 Chapter 1 Samuelson 18e PPF

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Pesent )hoices & FutuePossibilities

oods fo the Pesent

1oodsfotheFutue

1oodsfotheFutue

oods fo the Pesent

Present+ille Future+ille

P

F

,urrent,ur+e

,urrent,ur+e

Future,ur+e

Future,ur+e

,o(#re 'o y(otetic#l -conoies

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The Poduction Possibilities in a

aph

Chapter 1

Figure 1-1

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The Poduction:Possibility

Fontie

Chapter 1

Figure 1-2

PPF shows how the

production of one good istraded o against the

production of another good.

In the world of scarcity,

choosing one thing means

giving up something else.

he value of the good orservice forgone is its

opportunity cost.

PPF shows how the

production of one good is

traded o against the

production of another good.

!hen an economy is on its

PPF, it can produce more of

one good only "y producing

less of another good.

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Economic o0th Shifts

the PPFOut0ad

Chapter 1

Figure 1-3

ith economic growth, a nation moves from A to #, e$panding its food consumption little compared

ith its increased consumption of lu$uries. It can increase its consumption of "oth goods if it desires.

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Economics .ust )hoose bet0een

Public oods and Pi"ate oods

Chapter 1

Figure 1-4

%a& A poor frontier society lives from hand to mouth, with little left for pu"lic goods li'e

highways or pu"lic health.

%"& (odern ur"ani)ed economy is prosperous and chooses to spend more of its higher incomon pu"lic goods and government services.

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In"estment fo Futue )onsumption

,e;uies Sacificing )uent

)onsumption

Chapter 1

Figure 1-5

*ountries that invest more heavily forge ahead with this they have higher investment and

consumption in the future.

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The Poduction:Possibility

Fontie

,ich counties find it easie than

poo counties to de"ote

esouces to the poduction of

capital< and the moe esoucesthat flo0 into capital poduction