1. Economics: Foundations and Models

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

3. Economics: Foundations and Models

5. Building a Foundation: Economics and Individual Decisions

6. Apple Computer Makes a Decision at the Margin

7. The Economic Problem That Every Society Must Solve

8. Centrally Planned Economies versus Market Economies

9. Efficiency and Equity

10. Economic Models

12. Normative and Positive Analysis

13. Microeconomics and Macroeconomics

14. A Preview of Important Economic Terms

15. The Halo Effect

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

17. Appendix 1A: Using Graphs and Formulas

18. Graphs of One Variable

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

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

21. Appendix 1A: Using Graphs and Formulas

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

30. CHAPTER 1: Economics: Foundations and Models

31. c h a p t e r o n e

32. Prepared by: Fernando & Yvonn Quijano

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

34. LEARNING OBJECTIVES

35. 1

36. 2

37. 3

38. 4

39. 5 Many U.S., Japanese, and European firms have been moving the production of goods and services to other countries.

40. Scarcity The situation in which unlimited wants excee

41. 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

42. 1 - 1

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

44. 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?

45. 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.

46. 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.

47. Productive efficiency The situation in which a good or

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

49. 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

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

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

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

53. LEARNING OBJECTIVE 4 Microeconomics The study of

54. 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

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

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

57. 1A - 1 Bar Graphs and Pie Charts

58. 1A - 2 Time-Series Graphs

59. 1A - 3 Plotting Price and Quantity Points in a Graph

60. 1A - 4 Calculating the Slope of a Line Graphs of Two Variables Slopes of Lines

61. 1A - 5 Graphs of Two Variables Taking Into Account More Than Two Variables on a Graph Showing Three Variables on a Graph

62. 1A - 6 Graphs of Two Variables Positive and Negative Relationships Graphing the Direct Relationship between Income and Consumption Spending

63. 1A - 7 Graphs of Two Variables Slopes of Nonlinear Curves The Slope of a Nonlinear Curve

64. Formulas Formula for a Percentage Change

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

66. 1A - 8 Formulas Formulas for the Areas of a Rectangle and a Triangle

67. 1A - 9 Formulas Formulas for the Areas of a Rectangle and a Triangle The Area of a Right Triangle

68. Formulas Summary of Using Formulas

70. Economics: Foundations and Models

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

72. Economics: Foundations and Models

74. Building a Foundation: Economics and Individual Decisions

75. Apple Computer Makes a Decision at the Margin

76. The Economic Problem That Every Society Must Solve

77. Centrally Planned Economies versus Market Economies

78. Efficiency and Equity

79. Economic Models

81. Normative and Positive Analysis

82. Microeconomics and Macroeconomics

83. A Preview of Important Economic Terms

84. The Halo Effect

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

86. Appendix 1A: Using Graphs and Formulas

87. Graphs of One Variable

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

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

90. Appendix 1A: Using Graphs and Formulas

99. Economics: Foundations and Models

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

101. Economics: Foundations and Models

103. Building a Foundation: Economics and Individual Decisions

104. Apple Computer Makes a Decision at the Margin

105. The Economic Problem That Every Society Must Solve

106. Centrally Planned Economies versus Market Economies

107. Efficiency and Equity

108. Economic Models

110. Normative and Positive Analysis

111. Microeconomics and Macroeconomics

112. A Preview of Important Economic Terms

113. The Halo Effect

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

115. Appendix 1A: Using Graphs and Formulas

116. Graphs of One Variable

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

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

119. Appendix 1A: Using Graphs and Formulas

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

127. 1A - 5 Showing Three Variables on a Graph

128. Graphs of Two Variables Positive and Negative Relationships

129. 1A - 6 Graphing the Direct Relationship between Income and Consumption

130. Graphs of Two Variables Slopes of Nonlinear Curves

131. 1A - 7 The Slope of a Nonlinear Curve

132. Formulas Formula for a Percentage Change

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

135. Economics: Foundations and Models

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

137. Economics: Foundations and Models

139. Building a Foundation: Economics and Individual Decisions

140. Apple Computer Makes a Decision at the Margin

141. The Economic Problem That Every Society Must Solve

142. Centrally Planned Economies versus Market Economies

143. Efficiency and Equity

144. Economic Models

146. Normative and Positive Analysis

147. Microeconomics and Macroeconomics

148. A Preview of Important Economic Terms

149. The Halo Effect

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

151. Appendix 1A: Using Graphs and Formulas

152. Graphs of One Variable

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

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

155. Appendix 1A: Using Graphs and Formulas

163. 1A - 8 Formulas Formulas for the Areas of a Rectangle and a Triangle

164. 1A - 9 Formulas Formulas for the Areas of a Rectangle and a Triangle The Area of a Triangle

165. Formulas Summary of Using Formulas

167. Economics: Foundations and Models

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

169. Economics: Foundations and Models

171. Building a Foundation: Economics and Individual Decisions

172. Apple Computer Makes a Decision at the Margin

173. The Economic Problem That Every Society Must Solve

174. Centrally Planned Economies versus Market Economies

175. Efficiency and Equity

176. Economic Models

178. Normative and Positive Analysis

179. Microeconomics and Macroeconomics

180. A Preview of Important Economic Terms

181. The Halo Effect

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

183. Appendix 1A: Using Graphs and Formulas

184. Graphs of One Variable

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

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

187. Appendix 1A: Using Graphs and Formulas

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

196. CHAPTER 1: Economics: Foundations and Models

197. Formulas Formulas for the Areas of a Rectangle and a Triangle

198. 1A - 8

199. Formulas Formulas for the Areas of a Rectangle and a Triangle

200. 1A - 9 The Area of a Triangle

202. Economics: Foundations and Models

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

204. Economics: Foundations and Models

206. Building a Foundation: Economics and Individual Decisions

207. Apple Computer Makes a Decision at the Margin

208. The Economic Problem That Every Society Must Solve

209. Centrally Planned Economies versus Market Economies

210. Efficiency and Equity

211. Economic Models

213. Normative and Positive Analysis

214. Microeconomics and Macroeconomics

215. A Preview of Important Economic Terms

216. The Halo Effect

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

218. Appendix 1A: Using Graphs and Formulas

219. Graphs of One Variable

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

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

222. Appendix 1A: Using Graphs and Formulas

231. Economics: Foundations and Models

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

233. Economics: Foundations and Models

235. Building a Foundation: Economics and Individual Decisions

236. Apple Computer Makes a Decision at the Margin

237. The Economic Problem That Every Society Must Solve

238. Centrally Planned Economies versus Market Economies

239. Efficiency and Equity

240. Economic Models

242. Normative and Positive Analysis

243. Microeconomics and Macroeconomics

244. A Preview of Important Economic Terms

245. The Halo Effect

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

247. Appendix 1A: Using Graphs and Formulas

248. Graphs of One Variable

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

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

251. Appendix 1A: Using Graphs and Formulas

260. Economics: Foundations and Models

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

262. Economics: Foundations and Models

264. Building a Foundation: Economics and Individual Decisions

265. Apple Computer Makes a Decision at the Margin

266. The Economic Problem That Every Society Must Solve

267. Centrally Planned Economies versus Market Economies

268. Efficiency and Equity

269. Economic Models

271. Normative and Positive Analysis

272. Microeconomics and Macroeconomics

273. A Preview of Important Economic Terms

274. The Halo Effect

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

276. Appendix 1A: Using Graphs and Formulas

277. Graphs of One Variable

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

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

280. Appendix 1A: Using Graphs and Formulas

288. Scarcity The situation in which unlimited wants exce

290. Economics: Foundations and Models

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

292. Economics: Foundations and Models

294. Building a Foundation: Economics and Individual Decisions

295. Apple Computer Makes a Decision at the Margin

296. The Economic Problem That Every Society Must Solve

297. Centrally Planned Economies versus Market Economies

298. Efficiency and Equity

299. Economic Models

301. Normative and Positive Analysis

302. Microeconomics and Macroeconomics

303. A Preview of Important Economic Terms

304. The Halo Effect

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

306. Appendix 1A: Using Graphs and Formulas

307. Graphs of One Variable

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

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

310. Appendix 1A: Using Graphs and Formulas

319. Economics: Foundations and Models

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

321. Economics: Foundations and Models

323. Building a Foundation: Economics and Individual Decisions

324. Apple Computer Makes a Decision at the Margin

325. The Economic Problem That Every Society Must Solve

326. Centrally Planned Economies versus Market Economies

327. Efficiency and Equity

328. Economic Models

330. Normative and Positive Analysis

331. Microeconomics and Macroeconomics

332. A Preview of Important Economic Terms

333. The Halo Effect

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

335. Appendix 1A: Using Graphs and Formulas

336. Graphs of One Variable

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

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

339. Appendix 1A: Using Graphs and Formulas