macsg01 - 1 The Scope and Method of Economics C hapter...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
3 1 The Scope and Method of Economics C hapter objectives: 1. Define economics. 2. State four reasons for studying economics. 3. Distinguish between the concepts of opportunity cost and marginal cost. 4. Define market efficiency in terms of profit opportunities. 5. Make clear the difference between microeconomic and macroeconomic concerns. 6. Distinguish between positive economics and normative economics. 7. Explain the value of the ceteris paribus assumption within the context of economic modeling. 8. State the fallacies discussed in the text, give examples, and explain why such statements are fallacious. 9. State and explain the four criteria used to assess the outcomes of economic policy. 10. Construct and interpret graphs and linear equations. Much of this chapter is devoted to setting out the framework of economics. Don’t be overwhelmed and don’t try to remember it all. Chapter 1 is simply a good place to gather together this information, which will be dealt with more fully as the chapters go by. BRAIN TEASER: An increasing number of basketball players move directly to the NBA draft without graduating from college. Some, such as LeBron James, even go to the NBA straight from high school. James, the first pick in the NBA draft of 2003, went to the Cleveland Cavaliers with whom he signed a three-year, $12.96 million contract. He also signed a $90 million endorsement deal with Nike. What was the opportunity cost for LeBron James of choosing to go directly to the NBA, given that he was eligible for college? SOLUTION: The answer to this and subsequent brain teasers will be found after our discussion of the learning objectives and before the Practice Tests.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Study Guide to Principles of Macroeconomics OBJECTIVE 1: Define economics. Because of conditions imposed by nature and the choices previously made by society, resources are scarce. Economics studies how we choose to use these resources to best satisfy society’s unlimited wants. In a sense, economics is the “scientific study of rational choice.” (page 1) Practice 1. Which one of the following best describes the study of economics? Economics studies (a) how businesses can make profits. (b) how the government controls the economy and how people earn a living. (c) how society uses its scarce resources to satisfy its unlimited desires. (d) the allocation of income among different sectors of the economy. ANSWER: (c) All of the options represent aspects of the study of economics. However, the most general statement is given in Option (c)—economics is the study of choice.   OBJECTIVE 2: State four reasons for studying economics. A study of economics helps one to learn a way of thinking, to understand society, to understand national and global affairs, and to be an informed citizen. Essential to the economic way of thinking is the concept of “opportunity cost”—choices involve forgoing some options. Accordingly, the applicability of the economic way of thinking is very extensive. (page 2) OBJECTIVE 3: Distinguish between the concepts of opportunity cost and marginal cost.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 30

macsg01 - 1 The Scope and Method of Economics C hapter...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online