The Economic Way of Thinking. Everything has a cost. People choose for good reasons. People gain from voluntary trade.

Transcription

1 VIUAL 1-1 The Economic Way of Thinking Everything has a cost. eople choose for good reasons. eople gain from voluntary trade. Economic thinking is marginal thinking. The value of a good or service is affected by people s choices. Economic actions create secondary effects. The test of a theory is its ability to predict correctly. Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. 9 CEE-AE_MACROE MATM-Book.indb 9

2 VIUAL 1-2 roduction ossibilities Curve 12 A 10 B ARMY TRUCK 8 6 C E 4 F CAR (1) What trade-offs are involved? (2) Why is the C concave, or bowed out, from the origin? (3) What does a point inside the C illustrate? (4) What is a historical example of a point inside the C? (5) What is the significance of a point outside the C? (6) Under what conditions can a point outside the C be reached? (7) What would a country s C look like if it did not have a scarcity of resources? Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. 13 CEE-AE_MACROE MATM-Book.indb 13

3 VIUAL 1-3 etermining Comparative Advantage (Output Method) Output per hour Cs ounds of beef Japan 20 5 Mexico (1) Which country has an absolute advantage in producing Cs? (2) Which country has an absolute advantage in producing beef? (3) Which country has a comparative advantage in producing Cs? (4) Which country has a comparative advantage in producing beef? (5) Which country should specialize in C production? (6) Which country should specialize in beef production? 18 Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. CEE-AE_MACROE MATM-Book.indb 18

4 VIUAL 1-4 etermining Comparative Advantage (Input Method) Time required for one unit 1 C 1 pound of beef Japan 3 minutes 12 minutes Mexico 2 minutes 4 minutes (1) Which country has an absolute advantage in producing Cs? (2) Which country has an absolute advantage in producing beef? (3) Which country has a comparative advantage in producing Cs? (4) Which country has a comparative advantage in producing beef? (5) Which country should specialize in C production? (6) Which country should specialize in beef production? Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. 19 CEE-AE_MACROE MATM-Book.indb 19

5 VIUAL 1-5 Illustrating the ifference between a Change in emand and a Change in Quantity emanded $8 $7 $6 RICE ER GREEBE $5 $4 $3 A 1 $2 B $ (hundreds of Greebes per week) Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. 23 CEE-AE_MACROE MATM-Book.indb 23

6 VIUAL 1-6 eterminants of emand FACTOR that shift the demand curve Change in consumer tastes Change in the number of buyers Change in consumer incomes Change in the prices of complementary and substitute goods Change in consumer expectations 24 Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. CEE-AE_MACROE MATM-Book.indb 24

7 VIUAL 1-7 Illustrating the ifference between a Change in upply and a Change in Quantity upplied $8 $7 2 $6 RICE ER GREEBE $5 $4 $3 A B 1 $2 $ (hundreds of Greebes per week) Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. 27 CEE-AE_MACROE MATM-Book.indb 27

8 VIUAL 1-8 eterminants of upply FACTOR THAT HIFT THE ULY CURVE Change in resource prices or input prices Change in technology Change in taxes and subsidies Change in the prices of other goods Change in producer expectations Change in the number of suppliers Any factor that increases the cost of production decreases supply. Any factor that decreases the cost of production increases supply. 28 Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. CEE-AE_MACROE MATM-Book.indb 28

9 VIUAL 1-9 Equilibrium and isequilibrium $6 $5 $4 800 Greebe surplus RICE ER GREEBE $3 $2 800 Greebe shortage $ (hundreds of Greebes per week) Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. 31 CEE-AE_MACROE MATM-Book.indb 31

10 VIUAL 1-10 The Effects of hifts in emand or upply RICE 1 RICE Q Q 1 Q 1 Q A. INCREAE IN EMAN B. ECREAE IN EMAN Q Q 1 RICE 1 RICE 1 1 Q Q 1 Q 1 Q C. INCREAE IN ULY Q. ECREAE IN ULY Q 32 Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. CEE-AE_MACROE MATM-Book.indb 32

11 VIUAL 1-11 hases of the Business Cycle eak Expansionary (Recovery) Contractionary (Recession) REAL G Long-run trend of real G Trough Expansionary (Recovery) ERIO OF TIME Advanced lacement Economics Macroeconomics: Teacher Resource Manual Council for Economic Education, New York, N.Y. 35 CEE-AE_MACROE MATM-Book.indb 35