Economic Choices Chapter 2

What are the consequences of Economic choices? Trade-offs Opportunity costs TANSTAAFL’s Principle What is sacrificed? Opportunity benefits

What are the three basic economic questions? What to produce? What and how much of particular goods and services to produce?

The Basic Economic Questions How to produce? Depends on economy’s resources Underemployed labor versus capital equipment Saving releases resources for investment Government investment in infrastructure Role of new technology

The basic economic questions For whom to produce. Concerns income distribution

What are society’s economic goals? Growth Efficiency Full Employment Price stability

Society’s Economic Goal GROWTH Increases production capacity of the economy Investing in growth means faster growth

Society’s Economic Goal EFFICIENCY Maximizing output or minimizing resource use

Society’s Economic Goal FULL EMPLOYMENT Everyone who wants a job is working

Production Possibilities Curve

Production Possibilities Curve Shifts Due to changes in Land Labor Capital Technology

Society’s Economic Goal PRICE STABILITY Relatively constant level of prices for goods and services

Socioeconomic Goals Social goals that can affect the economy