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**Circular Flow Diagram** A visual model of the economy that shows how dollars flow through markets among households and firms **Production Possibilities Frontier** A graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology **Microeconomics** The study of how households and firms make decisions and how they interact in markets The study of economy wide phenomena, including inflation, unemployment, and economic growth Claims that attempt to describe the world as it is Claims that attempt to prescribe how the world should be
 * Key Concepts**
 * Macroeconomics**
 * Positive Statement**
 * Normative Statement**

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Economics Models - The Circular-Flow Diagram http://www.people.eku.edu/ruppelf/Eco230/circularflow.gif Households Firms Factor Markets Product Markets
 * Buy and consume goods and services
 * Own and sell factors of production
 * Produce and sell goods and services
 * Hire and use factors of production
 * Households sell
 * Firms buy
 * Firms sell
 * Households buy

The Production Possibilities Frontier A graph that shows the various combination of output - usually between two objects

http://i.investopedia.com/inv/dictionary/terms/ppf.gif The production possibilities frontier shows the combination of output - in this case, cars and computer - that the economy can possibly produce. The economy can produce any combination on or inside the frontier. Points outside the frontier are not feasible given the economy's resources. (unless they trade)

The Production Possibilities frontiers are almost never linear. Economists believe that production possibilities frontier often have this bowed shape. Resources best suited to Product A production, such as skilled workers, are being used in the B Product industry. Because these workers probably aren't very good at making computer, the economy will not have to lose much A product production to increase A product production by one unit. The opportunity cost of a PRoduct A in terms of Product B is small and the frontier is relatively flat. By contrast when the economy is using most of its resources to make cars such as at point C the resources best suited to making cars are already in the Product B industry.

NOTE :: ignore the labels. X axis is Product B and Y axis is Product A. from :: http://wps.prenhall.com/wps/media/objects/3386/3467867/question12_15.gif

Because of things such as technological advancements, there will be an increase in the production of Product B from point F to point A. not only does it incrase in the production of Product B, but also in the production of Product A, because such point as C to B, the production of product A increases too.

Microeconomics is the study of how households and firms make decision and how they interact in specific markets as for Macroeconomics is the study of economy-wide phenomena.

Microeconomist Macroeconomist Positive Statements & Normative statement They differ according to a person's belief. That is why it is hard to evaluate what is positive or normative.
 * Might study effects of rent control on housing in NYC
 * The impact of foreign compeition on the US auto industry
 * Effects of compulsory school attendance on wokers' earning
 * Effects of borrowing by federal government
 * The changes over time in the economy's rate of unemployment, or alternative policies to raise government policies to improve the nation's liviing standards

Economics is a young science and there is sitll much to be learned from this topic. Economist sometimes disagree with some science ideas because they have different hunches about the validity of alternative theories or the sie of important parameters that measure how economics variables are related'

Sources: Thanks to the youtuber jodietheecongirl Back to Home!