Chap002 - The Economizing Problem CHAPTER TWO THE...

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CHAPTER TWO THE ECONOMIZING PROBLEM CHAPTER OVERVIEW This crucial chapter introduces students to a number of important concepts. The first part of the chapter stresses the economizing problem, which results because we have unlimited wants but limited resources. A discussion of full employment and efficiency follows. Both productive and allocative efficiency are defined and emphasized as desirable goals. The production possibilities curve model is introduced to illustrate these important concepts. Using this model, the concepts of opportunity costs and increasing opportunity costs, unemployment, growth, and present versus future possibilities are all demonstrated. Additional emphasis is placed on allocative efficiency, which is a concept new to most students. Some real-world applications of the production possibilities idea are presented. The chapter concludes by discussing how market and command economic systems differ, concentrating on who owns the factors of production and the method used to coordinate economic activity. The circular flow model is introduced to provide an overview of the way a market system operates. WHAT’S NEW The discussion of “utility” has been moved to chapter 1, along with accompanying Origin of the Idea web-button. This caused the remaining chapter web-buttons to be renumbered. A “Consider This” box on the college attendance decision and opportunity cost has been added to the text. A “Concept Illustration” piece on opportunity cost has been added to the instructors’ manual. Both previously appeared on the web site. The term “industrial robots” has been changed to “industrial machines” and “machines” to reduce student confusion. This change affects labels on some of the graphs and tables from the previous edition. Global Perspective 2.1 and references to Yugoslavia’s production possibilities curve that appeared in the previous edition have been deleted. The LAST WORD has been changed to a discussion of the terrorist attack on September 11, 2001, and the wars in Afghanistan and Iraq. Content from the previous edition’s LAST WORD on “Women and Expanded Production Possibilities” has been incorporated into the body of the chapter. A new LAST WORD question has been added. The first five chapter questions have been revised, and the first WEB-BASED QUESTION has been updated to reflect changes in the BLS website. INSTRUCTIONAL OBJECTIVES After completing this chapter, students should be able to: 1. Define the economizing problem, incorporating the relationship between limited resources and unlimited wants. 2. Identify types of economic resources and types of income associated with various factors. 3.
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Chap002 - The Economizing Problem CHAPTER TWO THE...

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