After reading this chapter, you should be able to: Define economics and the features of the economic perspective, describe the role of economic theory in economics, distinguish microeconomics from macroeconomics and positive economics from normative economics, list the categories of scarce resources and delineate the nature of the economizing problem.
Trang 1Limits, Alternatives, and Choices
Trang 2productive capacity
with making optimal choices under conditions of scarcity
Trang 3Scarcity and
• Resources
are scarce • Rational self-interest • Marginal benefit
• Choices must
be made • Individuals and utility • Marginal cost
• Opportunity
cost • Firms and profit • Marginal means extra
• There’s no
free lunch • Desired outcomes • MB and MC
Trang 4Observe Formulate a hypothesis Test the hypothesis
Accept, reject, or modify the hypothesis Continue to test the hypothesis, if necessary
Trang 5units
a whole or its basic subdivisions
or aggregates
Trang 6economy
Trang 7Individual’s Economizing Problem
Trang 86 5 4 3 2 1 0
0 2 4 6 8 10 12
DVDs
$20 Books $10
$120 Budget 12
10 8 6 4 2
0
2 4 6 8 10 12 14
Quantity of Paperback Books
dvd = $20 = 6
Income = $120
P b = $10 = 12
Attainable
Unattainable
Trang 9initiatives, makes decisions, innovates, and takes risks)
Trang 10Production Possibilities Model
Trang 11Type of Product
Pizzas
(in hundred thousands)
Industrial Robots
(in thousands)
Production Alternatives
10 9 7 4 0
Plot the Points to Create the Graph…
Production Possibilities Model
Trang 12The law of increasing opportunity costs makes the PPC
concave
Production Possibilities Model
Pizzas
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
U
Trang 13Attainable
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’
Trang 14Goods for the Present
Goods for the Present
P
F
Current Curve
Current Curve
Future Curve
Future Curve
Presentville Futureville
Compare Two Hypothetical Economies
Trang 15Pitfalls to Sound Economic Reasoning