7.5-7.6 Economics

7.5-7.6 Economics

Investment and Economy

Open Ended

What are types of investment. Give two.

Impact of Investment

• Q How can a firm or worker increase productivity?

• A: investment (using resources that can bring immediate benefits for the purpose of gaining greater benefits at a later time.)

Types of Investment

• Financial Investment - stocks or 401lk retirement plans at work

• Capital investment - investment in capital goods and human capital

• Capitol goods - products used to make other goods or provide services

• Consumer goods - items purchase for final use by individuals

Multiple Choice

What type of good is a one use water bottle?

• Capitol

• Consumer

Types of Investment

• Recycling - good (either capitol or consumer) is reprocessed and reused

• Education and training - people increase their knowledge, skills, and value but cannot take the place of real world experience

• For both producers and laborers, there are always trade-offs and opportunity costs to investments

Costs of Investment

• Q: How to decide how much to spend on investment versus how much on production and consumption?

• A: Producer Price Index (PPI)- measures the average changes in prices for different goods

• cost of investment is not only the amount that a producer spends on capital goods but also the opportunity cost of not using that $ to produce more goods to be sold

Poll

Has the price of gas gone up or down over the past year?

• Up

• Down

• Not sure

Costs of Investment

• the opportunity cost of lost production can be found by comparing the ratio of output versus input

• Input is all of the factors of production that go into making a good or service

• Output is the amoung of the good or service being made

Costs of Investment

• Law of Diminishing Returns - as more and more of a variable input (input whose amount, frequency can change) is combined with a fixed input (input that is unchanging), the amount of output per input increases

• ex. slices of pizza - limit to where you enjoy it

Multiple Choice

Using resources that could be used for immediate benefit for some greater benefit at a later time is called what?

• productivity

• investment

• capital good

• diminishing returns

Multiple Choice

Mark's company produces lawn mowers. In order to increase production and profits, Mark invests thousands of dollars in a new machine that assembles lawn mower engines much more efficiently than any previous system his company has used. The machine which Mark has purchased is what?

• an example of improved training

• an example of diminishing returns

• an example of input over output

• an example of capital good

Open Ended

Explain the law of diminishing returns in your own words.