Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Click to edit Master title style and for two-line headings Click to edit Master text styles

CHAPTER 1: Economics: Foundations and Models

c h a p t e r o n e

Prepared by: Fernando & Yvonn Quijano

Click to edit Master text styles SSecond level TThird level FFourth level FFifth level

LEARNING OBJECTIVES

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2

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5 Many U.S., Japanese, and European firms have been moving the production of goods and services to other countries.

Scarcity The situation in which unlimited wants excee

LEARNING OBJECTIVE 1 Market A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. Marginal analysis Analysis that involves comparing marginal benefits and marginal costs. Three important ideas: PPeople are rational PPeople respond to economic incentives OOptimal decisions are made at the margin

1 - 1

LEARNING OBJECTIVE 1 Should Apple produce an additional 300,000 iPods? IIn solving the problem, consider the fo

LEARNING OBJECTIVE 2 Trade-off The idea that because of scarcity, producing more of one good or service means producing less of another good or service. Three fundamental questions: WWhat goods and services will be produced? HHow will the goods and services be produced? WWho will receive the goods and services produced?

Centrally planned economy An economy in which the government decides how economic resources will be allocated. MMarket economy An economy in which the decisions of households and firms interacting in markets allocate economic resources.

Mixed economy An economy in which most economic decisions result from the interaction of buyers and sellers in markets, but in which the government plays a significant role in the allocation of resources.

Productive efficiency The situation in which a good or

LEARNING OBJECTIVE 3 To develop a model, economists generally follow these steps: DDecide on the assumptions

LEARNING OBJECTIVE 3 The Role of Assumptions in Economic Models EEconomic models make behavioral assumptions about the motives of consumers and firms. FForming and Testing Hypotheses in Economic Models

Economic variable Something measurable that can have different values, such as the wages of software programmers.

Positive analysis Analysis concerned with what is. NNormative analysis Analysis concerned with what ought to be.

Does outsourcing by U.S. firms raise or lower incomes in the United States? When Economists Disagree: A Debate Over Outsourcing 1 - 1

LEARNING OBJECTIVE 4 Microeconomics The study of

LEARNING OBJECTIVE 5 Entrepreneur IInnovation TTechnology FFirm, company, or business GGoods SServices RRevenue Opportunity cost PProfit HHousehold FFactors of production or economic resources CCapital HHuman capital

Figure 1: Many countries, including the United States, have experienced rapidly increasing exports to China.

Market economy MMicroeconomics MMixed economy NNormative analysis PPositive analysis PProductive efficiency SScarcity TTrade-off VVoluntary exchange

1A - 1 Bar Graphs and Pie Charts

1A - 2 Time-Series Graphs

1A - 3 Plotting Price and Quantity Points in a Graph

1A - 4 Calculating the Slope of a Line Graphs of Two Variables Slopes of Lines

1A - 5 Graphs of Two Variables Taking Into Account More Than Two Variables on a Graph Showing Three Variables on a Graph

1A - 6 Graphs of Two Variables Positive and Negative Relationships Graphing the Direct Relationship between Income and Consumption Spending

1A - 7 Graphs of Two Variables Slopes of Nonlinear Curves The Slope of a Nonlinear Curve

Formulas Formula for a Percentage Change

Using the growth of Gross Domestic Product (GDP) as an example:

1A - 8 Formulas Formulas for the Areas of a Rectangle and a Triangle

1A - 9 Formulas Formulas for the Areas of a Rectangle and a Triangle The Area of a Right Triangle

Formulas Summary of Using Formulas

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Graphs of Two Variables Taking Into Account More Than Two Variables on a Graph

1A - 5 Showing Three Variables on a Graph

Graphs of Two Variables Positive and Negative Relationships

1A - 6 Graphing the Direct Relationship between Income and Consumption

Graphs of Two Variables Slopes of Nonlinear Curves

1A - 7 The Slope of a Nonlinear Curve

Formulas Formula for a Percentage Change

Using the growth of Gross Domestic Product (GDP) as an example:

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

1A - 8 Formulas Formulas for the Areas of a Rectangle and a Triangle

1A - 9 Formulas Formulas for the Areas of a Rectangle and a Triangle The Area of a Triangle

Formulas Summary of Using Formulas

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Click to edit Master title style and for two-line headings Click to edit Master text styles

CHAPTER 1: Economics: Foundations and Models

Formulas Formulas for the Areas of a Rectangle and a Triangle

1A - 8

Formulas Formulas for the Areas of a Rectangle and a Triangle

1A - 9 The Area of a Triangle

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Scarcity The situation in which unlimited wants exce

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas

Economics: Foundations and Models

What Happens When U.S. Firms Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve

Centrally Planned Economies versus Market Economies

Efficiency and Equity

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

Appendix 1A: Using Graphs and Formulas

Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of One Variable

Appendix 1A: Using Graphs and Formulas Graphs of Two Variables

Appendix 1A: Using Graphs and Formulas