1. Copyright © 2004 South-Western Thinking Like an Economist

2. Copyright © 2004 South-Western Definition of Economics "Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses." -- Lional Robbins "Economics is the study of how human beings coordinate their wants and desires, given the decision making mechanism, social customs, and political realities of the society. “ --David Colander "Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses." -- Lional Robbins "Economics is the study of how human beings coordinate their wants and desires, given the decision making mechanism, social customs, and political realities of the society. “ --David Colander

3. Copyright © 2004 South-Western Three Coordination Problems 1.What and how much to produce. 2.How to produce it. 3.For whom to produce it. 1.What and how much to produce. 2.How to produce it. 3.For whom to produce it.

4. Copyright © 2004 South-Western Macroeconomics vs. Microeconomics

5. Copyright © 2004 South-Western Figure 1 The Circular Flow

6. Copyright © 2004 South-Western Figure 2 The Production Possibilities Frontier

7. Copyright © 2004 South-Western Figure 3 A Shift in the Production Possibilities Frontier

8. Copyright © 2004 South-Western Opportunity cost of x: the benefit forgone by undertaking x. Apply: going to college, going to class, going to a movie. Opportunity cost of x: the benefit forgone by undertaking x. Apply: going to college, going to class, going to a movie.

9. Copyright © 2004 South-Western Fundamental decision rule in economics marginal benefit = marginal cost Fundamental decision rule in economics marginal benefit = marginal cost

10. Table 2 Ten Propositions about Which Most Economists Agree Copyright © 2004 South-Western

11. Positive vs. normative economics. The art of doing economics is the application of the knowledge learned in positive economics to the achievement of goals one has determined in normative economics. Positive vs. normative economics. The art of doing economics is the application of the knowledge learned in positive economics to the achievement of goals one has determined in normative economics.

12. Copyright © 2004 South-Western Figure A-1 Types of Graphs

13. Copyright © 2004 South-Western Figure A-2 Using the Coordinate System

14. Table A-1 Novels Purchased by Emma Copyright©2003 Southwestern/Thomson Learning

15. Copyright © 2004 South-Western Figure A-3 Demand Curve

16. Copyright © 2004 South-Western Figure A-4 Shifting Demand Curves

17. Copyright © 2004 South-Western Figure A-5 Calculating the Slope of a Line

18. Copyright © 2004 South-Western Figure A-6 Graph with an Omitted Variable

19. Copyright © 2004 South-Western Figure A-7 Graph Suggesting Reverse Causality