Lecture Essentials of economics (3/e): Chapter 1 - Brue, McConnell, Flynn

Chapter 1 - Limits, alternatives, and choices. This chapter introduces many of the fundamental concepts in economics, and we cover a wide variety of concepts. We start with the definition of economics; then we will discuss the economic perspective. Then the discussion moves to the development of economic theory.

Chapter 1

Limits, Alternatives, and

Choices

with making optimal choices under conditions of scarcity.

1­2

Scarcity and Choice

1­4

Purposeful Behavior

Marginal Analysis

benefit and marginal cost

1­6

Observe Formulate a hypothesis Test the hypothesis

Accept, reject, or modify the hypothesis Continue to test the hypothesis, if necessary

• Limited income

• Unlimited wants

• A budget line

• Attainable and unattainable options

• Trade-offs and opportunity costs

• Make the best choice possible

• Change in income

Individual’s Economizing Problem

6 5 4 3 2 1 0

0 2 4 6 8 10 12

DVDs

10 8 6 4 2 0

Average Income, Selected Nations

E

The law of increasing opportunity costs makes the PPC

concave.

1­16

the opportunity cost of producing an

additional unit rises

0

1 2 3 Quantity of Pizza

A B C

Current Curve

Future Curve

Future Curve