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Chapter+01+_Introduction_

Chapter+01+_Introduction_ - everyone in the group 1 Bumper...

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Chapter 1 Introduction
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2 “It may seem a shocking thing to say, but most of the economics that is usable for advising on public policy is at the level of the introductory undergraduate course.” Herbert Stein
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Microeconomics Studies one decision making unit and one market Macroeconomics Studies aggregate economy-wide magnitudes 3 Why Two Different Fields? The Fallacy of Composition
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4 Fallacy of composition: What is true for one person in a group may not be true for
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Unformatted text preview: everyone in the group 1. Bumper crop 2. Paradox of thrift 3. (Uniform) increase in prices Consumer Buys Goods and Services Given Prices and Income Worker Supplies Labor Given Wage Rates and Prices Employer Hires Labor Given Prices and Wage Rates Producer Produces Goods and Services Given Prices and Costs Major Economic Decision Makers H o u s e h o l d F i r m 5 Other Decision Makers • Investors • Lenders • Borrowers 6...
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