Unit 1 : Macroeconomics National Council on Economic Education Production Possibilities Curve

Unit 1 : Macroeconomics National Council on Economic Education Production Possibilities Curve Constant Opportunity Cost Decreasing Opportunity Cost

Unit 1 : Macroeconomics National Council on Economic Education Absolute Advantage and Comparative Advantage ABSOLUTE ADVANTAGE One individual or nation can produce more output with the same resources as another individual or nation. COMPARATIVE ADVANTAGE One individual or nation can produce a good at a lower opportunity cost than another EXAMPLES OF COMPARATIVE ADVANTAGE Economics professor and secretary Auto mechanic and medical doctor

Unit 1 : Macroeconomics National Council on Economic Education Determining Comparative Advantage (Output Method) 1.Which nation has an absolute advantage in producing corn? 2.Which nation has an absolute advantage in producing sunscreen? 3.Which nation has a comparative advantage in producing corn? 4.Which nation has a comparative advantage in producing sunscreen? 5.Should Mexico specialize in corn or sunscreen? 6.Should France specialize in corn or sunscreen?

Unit 1 : Macroeconomics National Council on Economic Education Movement Along a Demand Curve As the price declines from P to P1, the quantity increases from Q to Q1

Unit 1 : Macroeconomics National Council on Economic Education Shift in Demand Increase in demand from D to D1 shows that at the same price (P), the quantity increased from Q to Q1 Factors that Shift Demand: 1.Number of Consumers 2.Price of complementary good 3.Price of substitute good 4.Consumer income 5.Expectations about income or prices

Unit 1 : Macroeconomics National Council on Economic Education Movement Along a Supply Curve As the price declines from P1 to P, the quantity decreases from Q1 to Q.

Unit 1 : Macroeconomics National Council on Economic Education Shift in Supply Increase in supply from S to S1 shows that at the same price (P), the quantity increased from Q to Q1. Factors that Shift supply: 1.Number of suppliers 2.Prices of resources used to produce good 3.Prices of related goods produced 4.Technology 5.Expectations about future prices

Unit 1 : Macroeconomics National Council on Economic Education Equilibrium Quantity and Price What happens if the price is $10? What happens if the price is $6? What happens if the price is $8?

Unit 1 : Macroeconomics National Council on Economic Education Calculation of Price Elasticity of Demand

Unit 1 : Macroeconomics National Council on Economic Education Price Elasticity along a Demand Curve

Unit 1 : Macroeconomics National Council on Economic Education Effects of Different Demand Elasticities Which demand curve is more inelastic? What happens to the equilibrium price and quantity with an elastic demand curve if supply increases? What happens to the equilibrium price and quantity with an inelastic demand curve if supply increases?