The Economic Problem and Production Frontiers

The Economic Problem and Production Frontiers
Scarcity, Technological Progress


The Problem of Scarcity
• It is the state or condition in which human wants are always greater than the
available resources, goods, and time.
• Scarcity is a global issue
• Resources (factors of production)– basic inputs (land, labor, capital) used to
produce the final good and services.
• Entrepreneurship is labor


Applying Graphs to Economics
It tries to show the direct relationship of two variables. (positive Association and
Causation)
It tries to show the inverse relationship of two variables. (negative Association and
Causation)
It tries to show the independent relationship of two variables. (no changes)


Direct relationship of two variables


Positive Relationship
1500
I
Electric Bill




1000 H
G
F
500 E
D
C
0 B
A
0 5,000 10,000 15,000
Annual Income

Slope Linear (Slope)

, Inverse relationship of two variables


Inverse Relationship
60
50




Price of Soda
40 I H
30 G
F
E
20 D
10 C
B A
0
0 10 20 30 40 50
Qty

Linear (Slope)


Independent relationship of two variables

Independent Relationship
60
Price of Toothpaste




50
A B C D E F G H I
40
30
20
10
0
0 5,000 10,000 15,000
Annual Income

Linear (Slope)