1. Limits, Alternatives, and Choices Chapter 1 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

11. A Budget Line 6 5 4 3 2 1 0 0 2 4 6 8 10 12 DVDs $20 Books $10 12 10 8 6 4 2 0 2 4 6 8 10 12 14 $120 Budget Attainable Unattainable Quantity of Paperback Books Quantity of DVDs 1- Income = $120 P dvd = $20 = 6 Income = $120 P b = $10 = 12

14. 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 Points to Create Graph… Production Possibilities Table 1-

15. Production Possibilities Curve Pizzas Industrial Robots Attainable 0 1 2 3 4 5 6 7 8 9 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Unattainable A B C D E Economic Growth Now Attainable A’ B’ C’ D’ E’ 1-

16. Production Possibilities Curve Pizzas Industrial Robots Attainable 0 1 2 3 4 5 6 7 8 9 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Unattainable A B C D E Law of Increasing Opportunity Cost A’ B’ C’ D’ E’ Shape of the Curve 1-

17. Production Possibilities Curve Pizzas Industrial Robots Under or Unemployment 0 1 2 3 4 5 6 7 8 9 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Unattainable A’ B’ C’ D’ E’ U 1-

19. Future Possibilities Goods for the Present Goods for the Future Goods for the Future Goods for the Present P F Current Curve Current Curve Future Curve Future Curve Presentville Futureville 1-

21. Optimal Allocation of Resources 15 10 5 0 1 2 3 a b c d e MB = MC MC MB Quantity of Pizza Marginal Benefit & Marginal Cost 1-

24. The Market System and the Circular Flow 1-