Economic problem Limited Income Unlimited Wants

Chapter 1, LO5 1©2013 McGraw-Hill Ryerson Ltd.

©2013 McGraw-Hill Ryerson Ltd. Chapter 1, LO5 2

 [T1]Ed: Place Brazil ahead of Mexico [T2]Ed: Place Pakistan ahead of Nigeria

Country Per Capita Income, 2010 (U.S. dollars, based on

exchange rates)Switzerland 70,350 United States 47,140 Canada 41,950 France 42,390 Japan 42,150 South Korea 19,890 Brazil 9,390 Mexico 9,330 China 7,560 Pakistan 2,780 Nigeria 2,160 Rwanda 1,180 Liberia 330

LO4 1-3

A budget line Attainable and unattainable options Tradeoffs and opportunity costs Make the best choice possible

Change in income

©2013 McGraw-Hill Ryerson Ltd. 3 Chapter 1, LO5

LO4 1-4

Scarce Resources Land Capital Human Resources Labour Entrepreneurial Ability

▪ takes initiative▪ makes policy decisions▪ innovates▪ bears risk

©2013 McGraw-Hill Ryerson Ltd. 4 Chapter 1, LO5

LO5

Type of Product

Pizzas (in hundred thousands)

Industrial Robots (in thousands)

Production Alternatives

A B C D E

10 9 7 4 0

0 1 2 3 4

Plot the Points to Create the Graph…

1-5©2013 McGraw-Hill Ryerson Ltd. 5 Chapter 1, LO6

LO5

The law of increasing opportunity costs makes the PPC concave.

1-6

Pizzas

Indu

stria

l Rob

ots

Attainable

0 1 2 3 4 5 6 7 8 9

1413121110 9 8 7 6 5 4 3 2 1

Unattainable

A

B

C

D

E

U

©2013 McGraw-Hill Ryerson Ltd. 6Chapter 1, LO6

LO5

a

b

c

d

e

MB = MC

MC

MB

15

10

5

0

1 2 3Quantity of Pizza

Marg

inal B

en

efi

t &

Marg

inal

Cost

1-7©2013 McGraw-Hill Ryerson Ltd. 7 Chapter 1, LO6

LO5

U, represents unemployment or a failure to achieve productiveefficiency. The arrows indicate that, by realizing full employment andproductive efficiency, the economy could operate on the curve.

1-8

Pizzas

Indu

stria

l Rob

ots

0 1 2 3 4 5 6 7 8 9

1413121110 9 8 7 6 5 4 3 2 1

A

B

C

D

E

U

©2013 McGraw-Hill Ryerson Ltd. 8Chapter 1, LO7