Editors Notes:
  A. McConnell Economics Books, including the 18th edition, is one of many sources of material included in this chapter.
  B. Our Current Events Internet Library has an interesting economics section.

I. The factors of production (economic resources) and resulting income

      A. Static Model (time is constant, inputs are fixed)

          1. Consumer goods such as televisions, pizzas, and social security bring current satisfaction.
          2. Capital goods such as machinery, tractors, and improved technology increase future productive capabilities.
          3. Point F on the production possibility frontier represents full employment of all resources (100% efficiency).
          4. Point U represents unemployment of some economic resources.
          5. Having more capital goods requires giving up some consumer goods.
          6. Applies to individuals as you can invest by building a deck or going to school or you can go on an expensive vacation.
          7. How society and individuals answer these economic questions is explored in chapters five and six.

   C. Opportunity costs
        1. The cost of Item A measured in terms of what must be foregone of Item B.
        2. When considering doing A, we consider the highest valued alternative as limited resources 
            means we can't afford both.
        3. For more information visit the Production Possibilities Curve from Wikipedia.
        4. Politicians seldom talk of the opportunity cost of what they plan to do.
        5. Examples
            a. The opportunity cost of good grades is the value which could have been received by 
                spending time with family and friends.
            b. The opportunity costs of more capital goods is the value which could have been received  
                from having more consumer goods.
            c. The Guide to Country Profiles of the  CIA World Factbook for 2007 reports
                1. U.S. military spending was an estimated 4.06% of its 2005 GDP. 
                     2. Here is a rank order of country percentages.    
                3. What are the opportunity costs associated with high military spending?
                4. CIA,  Latest "The World Factbook
         6. Opportunity Cost Video reviews thee principles with a 5-minute lecture.

  D. Law of increasing opportunity costs
      1. Opportunity costs usually increase.
          a. To have one unit of Item A you must give up amount X of Item B. To have a second unit of Item A 
              you must give up more than amount X of Item B.
          b. Primary reason for increasing costs is resources are not perfect substitutes.
          c. Examples
              1) Training more people in math and science would increase productivity for a while but eventually 
                  people would be trained to be engineers who
                  would be  more productive as managers, teachers, or entertainers etc.
              2) The gain from replacing people with machines may be large in the beginning but eventually machines 
                  would be used to do what people can do more efficiently.
          d. When opportunity costs are not increasing, the production possibility curve is a straight line. High tech 
              investment  may even bend the curve the other way and have decreasing cost, but not forever!
          e. Below is an example of the trade-off between investing people in high tech industries versus entertainment industries.

         2. Econ Concepts in 60 Seconds Video: Production Possibilities Curve Constant and Increasing Opportunity Cost
         3. AmosWEB has more.
         4. Wide Angle . Video Bank . Factors of Production | Thirteen Ed Online