Basic Economics Consepts Answers

Analysis of the Image Visual Elements: Title: "Unit 1: Basic Economics Concepts" Key Terms: A list of terms with definitions. Production Possibilities Curve (PPC): A graph depicting the maximum combination of two goods that can be produced with a given amount of resources. Opportunity Cost Calculations: Calculations for the opportunity cost of producing different combinations of goods. Constant and Increasing Opportunity Cost Graphs: Two graphs illustrating different types of opportunity cost. Blank Graphs: Two blank graphs for students to draw their own PPCs. Textual Content: Key Terms (Define the following): Scarcity: Wants are greater than our limited resources. Positive vs. Normative Economics: What it is vs. what it ought to be. Trade-offs: Alternatives given up when a decision is made. Opportunity Cost: The most desirable alternative given up. Economic Systems: Centrally Planned Economies (Communism): Government decides what, how, and who. Free-Market Economies (Capitalism): Individuals own resources, profit motive, competition, self-interest. Mixed Economies: A combination of both. Production Possibilities Curve (Frontier): Use the chart to create a PPC to the right. Label the following three points on the graph: X = Unemployment/Inefficiency Y = Efficient Z = Impossible given current resource   Opportunity Cost Calculations: A-B: 1 shoe B-C: 1 shoe C-D: 1 hat D-E: 1 hat C-A: 2 hats Constant Opportunity Cost: Why does this occur? Resources are easily adaptable for either good. Increasing Opportunity Cost: Why does this occur? Resources are not easily adaptable for either good. Blank Graphs: Bicycles Tricycles iPhones Efficiency: Difference between allocative and productive efficiency: Allocative efficiency: Producing the most desired mix of goods/services by society. Productive efficiency: Producing goods/services at the least cost. Shifting the PPC: Identify the three shifters of the PPC: Change in resource quantity/quality Change in technology Change in trade Practice Problems: Scenario 1: Better resources for both products Scenario 2: Increase in consumer demand for pizza Scenario 3: Improvements in technology for only cars Trade: Absolute and Comparative Advantage: Table: | Country | Sugar (tons) | Cars | |---|---|---| | Cuba | 40 | 15 | | Mexico | 50 | 100 | Questions: Which country has an absolute advantage in sugar? Mexico Which country has an absolute advantage in cars? Mexico What is Cuba's opportunity cost for producing one car? 4 sugar Which country has a comparative advantage in cars? Mexico Which country has a comparative advantage in sugar? Cuba For both countries to benefit from trade, how much sugar can be traded for each car? 1 car for 2 sugar (anything between 1 and 4.5) Circular Flow Model: Diagram: A circular flow model showing the flow of goods/services, resources, and money between businesses, households, government, and the product and resource markets.