Topic 2: What is circular flow diagram? What are the major markets and economic decision makers the circular flow diagram indicates? What is the importance of the diagram in various markets of the economy or economic interactions (transactions)?
This is a visual model that shows how money flows through households and businesses. Businesses or firms and people in households are the economic decision makers that the circular flow diagram demonstrates. Basically, the firms or businesses produce the goods and services that the households consume. Businesses produce these goods using certain services like manual labor as well as land, buildings or machines. The households own these certain factors and consume the goods that are produced from these businesses.
Topic 3: Production possibility frontier indicates the maximum amount of two goods that can be produced, given scarce resources and prevalent technology. How does the production possibility frontier model help us understand the feasible and efficient amounts that can be produced?
Since the production possibility frontier states that you it is impossible to produce the maximum amount of two goods, you must decide how many of each good you can produce given the scare resources a business may have. It is said to be an efficient amount if a business is getting all that it can from the scare resources available. You must give up something to produce another. As the book illustrates, you can’t produce the maximum amount of cars or computers needed so if you could produce 200 cars but 0 computers, you may want to produce 100 cars and 200 computers. There is no way to produce more cars unless you produce fewer computers. With given resources, you can produce numbers inside the production but unable to outside the production parameters.
unit 2
Andre Warfield
6/21/2014 10:38:07 PM
Hello class,
Topic 1.
absolute advantage is where a company can produce more from less input or material where comparative is where a company/countries uses less can produce at a lower opportunity cost and they gain from trades for example when its spring and summer we can produce a lot of produce but when winter hits we trade with countries over seas another example is Florida specializes in oranges where Wisconsin is known for cheese they will trade with one another instead of worrying about everything the concur/specialize in one area and trade their product to others for what they do not produce.
Topic 3
The Production possibility frontier will allow us to see how much material we have to produce. It will allow us to know how much we can produce and if we should cut back or not it allows us to see if we will be taking a loss or a gain.
