1. EXHIBIT 1 Three Categories of ResourcesL a n d L a b o r C a p i t l E n t r e p u s h i o g a z c d v

2. EXHIBIT 2 The Steps in the Model-Building Process1
EXHIBIT 2 The Steps in the Model-Building Process I d e n t i f y h p r o b l m D e v l o p a m d b s n i f u t C o l e c t d a n s h m

3. EXHIBIT A-1 A Direct Relationship between Variablesu r e f o r a P e r s o n a l C o m p u t e r a t D i f f e r e n t A n n u a l I n c o m e s P e r s o n a l c o m p u t e r e x p e n d i t u r e A n n u a l i n c o m e P o i n t ( t h o u s a n d s o f d o l l a r s p e r y e a r ) ( t h o u s a n d s o f d o l l a r s ) A $ 1 $ 1 B 2 2 C 3 3 D 4 4 D 4 D Y = 3 C P e r s o n a l 3 c o m p u t e r D Y = 1 e x p e n d i t u r e B ( t h o u s a n d s o f 2 d o l l a r s p e r y e a r ) D X = 1 A 1 D X = 3 1 2 3 4 A n n u a l i n c o m e ( t h o u s a n d s o f d o l l a r s )

4. EXHIBIT A-2 An Inverse Relationship between Variables1
EXHIBIT A-2 An Inverse Relationship between Variables T h e Q u a n t i t y o f C o m p a c t D i s c s C o n s u m e r s P u r c h a s e a t D i f f e r e n t P r i c e s Q u a n t i t y o f c o m p a c t d i s c s P o i n t P r i c e p e r c o m p a c t d i s c p u r c h a s e d ( m i l l i o n s p e r y e a r ) A $ 2 5 B 2 2 5 C 1 5 5 D 1 7 5 E 5 1 A 2 5 B 2 P r i c e p e r C c o m p a c t d i s c 1 5 D Y = – 5 ( d o l l a r s ) D 1 D X = 2 5 E 5 2 5 5 7 5 1 Q u a n t i t y o f c o m p a c t d i s c s p u r c h a s e d ( m i l l i o n s p e r y e a r )

5. EXHIBIT A-3 An Independent Relationship between Variables1
EXHIBIT A-3 An Independent Relationship between Variables E x p e n d i t u r e f o r T o o t h p a s t e a t D i f f e r e n t A n n u a l I n c o m e s T o o t h p a s t e e x p e n d i t u r e A n n u a l i n c o m e P o i n t ( d o l l a r s p e r y e a r ) ( t h o u s a n d s o f d o l l a r s ) A $ 2 $ 1 B 2 2 C 2 3 D 2 4 4 T o o t h p a s t e 3 e x p e n d i t u r e ( d o l l a r s p e r y e a r ) A B C D 2 D X = 1 Y 1 1 2 3 4 A n n u a l i n c o m e ( t h o u s a n d s o f d o l l a r s )

6. EXHIBIT A-4 The Slope of an Upward-Sloping Curve1
EXHIBIT A-4 The Slope of an Upward-Sloping Curve 4 P e r s o n a l c o m p u t e r 3 D Y = 2 e x p e n d i t u r e ( t h o u s a n d s o f d o l l a r s A p e r y e a r ) 2 1 D X = 3 1 2 3 4 A n n u a l i n c o m e ( t h o u s a n d s o f d o l l a r s )

7. EXHIBIT A-5 The Slope of a Downward-Sloping Curve1
EXHIBIT A-5 The Slope of a Downward-Sloping Curve 2 5 2 P r i c e p e r 1 5 c o m p a c t d i s c D Y = – 1 ( d o l l a r s ) A 1 5 D X = 5 2 5 5 7 5 1 Q u a n t i t y o f c o m p a c t d i s c s p u r c h a s e d ( m i l l i o n s p e r y e a r )

8. EXHIBIT A-6 Changes in Price, Quantity, and Income in Two Dimensions1
EXHIBIT A-6 Changes in Price, Quantity, and Income in Two Dimensions 3 A n u a l i c o m e
$60,000 2 5 2 P r i c e p e r A n u a l i c o m e $ 3 , c o m p a c t d i s c ( d o l l a r s ) 1 5 1 5 2 5 5 7 5 1 1 2 5 1 5 Q u a n t i t y o f c o m p a c t d i s c s p u r c h a s e d ( m i l l i o n s p e r y e a r )

9. EXHIBIT A-7 Straight Line1
EXHIBIT A-7 Straight Line 2 D 1 5 Y v a l u e 1 C 5 5 1 1 5 2 X v a l u e

10. EXHIBIT A-8 Straight Line1
EXHIBIT A-8 Straight Line A 2 1 5 Y v a l u e 1 5 B 5 1 1 5 2 X v a l u e