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ADAM SMITH: A Scottish professor (born 1723, died 1790) who is considered the father of modern economics for his revolutionary book, entitled An Inquiry into the Nature and Causes of the Wealth of Nations published in 1776.

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Lesson 4: Production Possibilities | Unit 5: Investment Page: 19 of 24

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Investment is the tradeoff between consumption goods used for current satisfaction and capital goods that expand future productive capabilities.
  • Investment is not just putting money into the stock market. Investment is giving up current satisfaction to obtain greater future production, usually seen as giving up consumption goods to produce capital goods.
  • Education and human capital that increase the productive skills and ability of labor.
  • Exploration for mineral or fossil fuel deposits that add to land resources.
  • Scientific research that expands technology and resource quality.
  • The downside of investment is risk. There is no guarantee that you'll get something tomorrow.
Let's consider this basic tradeoff between capital and consumption.
  • Capital and consumption are the two basic types of goods needed for investment. If we produce more calibrators (capital), then we give up some jogging shoes (consumption).
  • This tradeoff IS the fundamental act of investment. In the graph to the right, if we move from bundle A to E to I, we are giving up jogging shoes and getting calibrators.
We are investing!

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AVERAGE REVENUE CURVE, MONOPOLY

A curve that graphically represents the relation between average revenue received by a monopoly for selling its output and the quantity of output sold. Because average revenue is essentially the price of a good, the average revenue curve is also the demand curve for a monopoly's output.

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ORANGE REBELOON
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Today, you are likely to spend a great deal of time at a crowded estate auction seeking to buy either a package of blank rewritable CDs or yellow cotton balls. Be on the lookout for slightly overweight pizza delivery guys.
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The first "Black Friday" on record, a friday marked by a major financial catastrophe, occurred on September 24, 1869 -- A FRIDAY -- when an attempted cornering of the gold market induced a financial crises and economy-wide depression.
"Intense concentration hour after hour can bring out resources in people they didn't know they had. "

-- Edwin Land, inventor, entrepreneur

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Marginal Rate of Substitution
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