Chapter Two: Module Summary -- Graphing & Slopes

• The slope of a line is the rise over the run, or the change in Y divided by the change in X.

• A positive slope indicates that X and Y are directly related; a negative slope indicates that X and Y are inversely related.

• A slope of zero indicates that the Y value does not change with changes in the X value; an infinite slope indicates that the X value does not change, regardless of the Y value.

• Scarcity occurs when, at a zero price, quantity demanded is greater than quantity supplied. Economics is concerned with the rationing of scarce resources.

• Because resources are limited, every decision we make involves a cost.

• Opportunity Cost is the value of the next best alternative that is given up.

• A Production Possiblilities Frontier (PPF) represents all possible combinations of the production of two goods given the available resources and technology.

• Points on the PPF are efficient, points inside the PPF are inefficient, and points outside the frontier are unattainable.

• The PPF bows outward because of the Principle of Increasing Costs: As production of a good expands, the opportunity cost of producing another unit generally increases. This occurs because resources are specialized.

• Economic growth occurs because there is an increase in the resource base, or there is an advance in technology that allows us to use our resources more productively. With economic growth, the PPF shifts outward.