EconomicsChapter One

EconomicsChapter One - CHAPTER ONE LIMITS, ALTERNATIVES,...

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CHAPTER ONE LIMITS, ALTERNATIVES, AND CHOICES CHAPTER OVERVIEW This chapter begins with a discussion of the meaning and importance of economics. In this first chapter, however, we will not plunge into problems and issues; instead we consider some important preliminaries. We first look at the economic perspective—how economists think about problems. Second, we examine economists’ use of the scientific method to investigate economic behavior and the economy. Finally, we explore the fundamental economic problem facing both individuals and societies, and develop the budget line, production possibilities model, and marginal benefit/cost analysis to examine resource allocation decisions. At the end of the text is an appendix introducing graphical analysis. While this will be review material for most students, for some this may be new. Students are strongly urged to confirm that they understand this section before proceeding. The software supplement can provide effective remedial help for those students who are not familiar with graphical analysis. INSTRUCTIONAL OBJECTIVES After completing this chapter, students should be able to:
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DEFINE ECONOMICS. DOES NOT INVOLVE MONEY CHAPTER ONE 1. LIMITS, ALTERNATIVES, AND CHOICES CHAPTER OVERVIEW This chapter begins with a discussion of the meaning and importance of economics. In this first chapter, however, we will not plunge into problems and issues; instead we consider some important preliminaries. We first look at the economic perspective—how economists think about problems. Second, we examine economists’ use of the scientific method to investigate economic behavior and the economy. Finally, we explore the fundamental economic problem facing both individuals and societies, and develop the budget line, production possibilities model, and marginal benefit/cost analysis to examine resource allocation decisions. At the end of the text is an appendix introducing graphical analysis. While this will be review material for most students, for some this may be new. Students are strongly urged to confirm that they understand this section before proceeding. The software supplement can provide effective remedial help for those students who are not familiar with graphical analysis. INSTRUCTIONAL OBJECTIVES After completing this chapter, students should be able to: 1. Define economics. Does not always involve money. Decisions between almost anything is economics. The study of how people make choices under the pressure of scarcity. Describe the “economic perspective” (or “economic way of thinking”), including definitions of scarcity, opportunity cost, purposeful behavior, utility, marginal analysis (benefits and costs), and how these concepts may be used in decision- making Scarcity- the difference between a free good and a scarce good. AIR is the ultimate example of a free good. There is enough air for everyone. We cannot control air. But we can control water, so water is not a free good, it is a scarce good.
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EconomicsChapter One - CHAPTER ONE LIMITS, ALTERNATIVES,...

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