Copyright 2011 Cengage Learning 2 Thinking Like an Economist

Copyright © 2011 Cengage Learning

22Thinking Like an Economist

Figure 1 The Circular Flow

Spending

Goods andservicesbought

Revenue

Goodsand servicessold

Labour, land,and capital

Income

= Flow of inputs and outputs

= Flow of euros

Factors ofproduction

Wages, rent,and profit

FIRMS•Produce and sellgoods and services

•Hire and use factorsof production

•Buy and consumegoods and services

•Own and sell factorsof production

HOUSEHOLDS

•Households sell•Firms buy

MARKETSFOR

FACTORS OF PRODUCTION

•Firms sell•Households buy

MARKETSFOR

GOODS AND SERVICES


Figure 2 The Production Possibilities Frontier

Productionpossibilitiesfrontier

A

B

C

Quantity ofcars produced

2,200

600

1,000

3000 700

2,000

3,000

1,000

Quantity ofcomputers

produced

D


Figure 3 A Shift in the Production Possibilities Frontier

E

Quantity ofcars produced

2,000

700

2,100

7500

4,000

3,000

1,000

Quantity ofcomputers

produced

A


Copyright © 2010 Cengage LearningCopyright © 2011 Cengage Learning

Table 1 Websites

Table 2 Ten Propositions about Which Most Economists Agree



Table 3 What Economists Know



Figure 2A.1 Types of Graph


Figure 2A.2 Using the Coordinate System


Table 2 Ten Propositions about Which Most Economists AgreeTable 2A.1 Novels Purchased by Pascale



Figure 2A.3 Demand Curve


Figure 2A.4 Shifting Demand Curves


Figure 2A.5 Calculating the Slope of a Line


Figure 2A.6 Graph With an Omitted Variable


Figure 2A.7 Graph Suggesting Reverse Causality

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Copyright 2011 Cengage Learning 2 Thinking Like an Economist