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Economic Activity in Context

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Presentation on theme: "Economic Activity in Context"— Presentation transcript:

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.


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