1. Economic Activity in Context
Chapter One:
Economic Activity in Context

2. The Goals of an Economy

3. Table 1.1: A Potential List of Final Goods

4. The Issues That Define Economics

5. Figure 1.1: The General Stock-Flow Diagram
Flows
Stock
Additions
Time
Subtractions
Initial
Next
Initial
Next
Stock
Stock
Starting from an initial quantity of a stock, flows into and out of the stock determine how great the quantity is the next time the stock is measured.

6. Figure 1.2: A “Bathtub”-Style Diagram
Additions
or Inflows
Subtractions
or Outflows
Stock
Like water flowing into a bathtub, flows that add to a stock will tend to raise its level over time. Like water flowing out of a bathtub, flows that subtract from a stock will tend to lower its level over time.

7. Economic Tradeoffs

8. Figure 1.3: Society’s Production Possibilities Frontier
As you select different points along the PPF, you see that the more you get of one good, the less you can have of the other.

9. Figure 1.4: An Expanded Production Possibilities Frontier
When the PPF moves “out” (away from the origin), we can obtain previously unattainable production choices, such as points D and E.

10. Figure 1.5: Society’s Choice between Current Production and Resource Maintenance
Society also faces a tradeoff between current production and resource maintenance for the future.

11. Figure 1.6: Possible Future Production Possibilities Frontiers
Current decisions about how to produce will affect our options for future production.