Chapter 2- Thinking like an Economist
The Economist as Scientist
Economists play two roles:
Scientists: try to explain the world
Policy Advisors: try to improve it
In the first, economists employ the scientific method, the dispassionate
Chapter 5: Elasticity and Application
Basic idea: Elasticity measures how much one variable responds to changes
in another variable
One type of elasticity measures how much quantity demanded for
your websites will fall if you raise your price.
Chapter 8: Application, The Costs of Taxation
Drives a wedge between the price buyers pay and the price sellers
Raises the price buyers pay and lowers the price sellers receive.
Reduces the quantity bought and sold
These effects are the
Chapter 3: Interdependence and the Gains from Trade
One of the 10 Principles from Chapter 1:
Trade can make everyone better off
Two countries: The US and Japan
Two Goods: Computers and wheat
One resource: Labor, measured
Chapter 11: Public Goods and Common Resources
We consume many goods without paying: parks, national defense, clean air,
When goods have no prices, the market forces that normally allocate
resources are absent.
The private market m
Chapter 4: The Market Forces of Supply and Demand
Markets and Competition:
A Market is a group of buyers and sellers of a particular product.
A Competitive Market is one with many buyers and sellers, each has a
negligible effect on price.
In a perfectl
Chapter 1: Ten Principles of Economics
What kinds of questions does economics address?
What are the principles of how people make decisions?
What are the principles of how people interact?
What are the principles of how the economy
Chapter 12: The Design of the Tax System
One of the ten principles from chapter 1:
A government can sometimes improve market outcomes.
Providing public goods
Regulating the use of common resources
Remedying the effects of externalities
Chapter 6: Supply, Demand, and Government Policies
Government Policies that Alter the Private Market Outcome:
Price ceiling: a legal maximum on the price of a good or service (ex:
Price Floor: a legal minimum on the price o
Chapter 9: Application: International Trade
The World Price and Comparative Advantage:
Pw = the world price of a good, the price that prevails in world markets
Pd = domestic price without trade
If Pd < Pw,
Country has comparative advantage in the good
Chapter 10: Externalities
One of the Ten Principles from Chapter 1:
Markets are usually a good way to organize economic activity
In the absence of market failures, the competitive market outcome is efficient,
maximizes total surplus.
One type of market
Chapter 7: Consumers, Producers, and the Efficiency of Markets
The allocation of resources refers to:
How much of each good is produced
Which producers produce it
Which consumers consume it
Welfare economics studies how the allocat
Chapter 14 Firms in Competitive Markets
Introduction: A Scenario
Three years after graduating, you run your own business.
You must decide how much to produce, what price to charge, how many
workers to hire, ect.
What factors should affect these decisio