Economics: Foundations and Models

1. Economics:Foundations and Models

2. What Happens When U.S. FirmsMove to China? After studying

3. Economics: Foundations and Models

4. Economics: Foundations and Models

5. Building a Foundation: Economics and Individual Decisions

6. Apple Computer Makes a Decision at the Margin

7. The Economic Problem That Every Society Must Solve

8. The Economic Problem That Every Society Must Solve Centrally Planned Economies versus Market Economies

9. Efficiency and Equity

10. Economic Models

11. Economic Models

12. Economic Models Normative and Positive Analysis

13. Microeconomics and Macroeconomics

14. A Preview of Important Economic Terms

15. The Halo Effect

16. Allocative efficiency CCentrally planned economy EEconomic model EEconomic variable EEconomics EEquity MMacroeconomics MMarginal analysis MMarket

17. Appendix 1A:Using Graphs and Formulas

18. Appendix 1A:Using Graphs and Formulas Graphs of One Variable

19. Appendix 1A:Using Graphs and Formulas Graphs of One Variable

20. Appendix 1A:Using Graphs and Formulas Graphs of Two Variables

21. Appendix 1A:Using Graphs and Formulas

22. Appendix 1A:Using Graphs and Formulas

23. Appendix 1A:Using Graphs and Formulas

24. Appendix 1A:Using Graphs and Formulas

25. Appendix 1A:Using Graphs and Formulas

26. Appendix 1A:Using Graphs and Formulas

27. Appendix 1A:Using Graphs and Formulas

28. Appendix 1A:Using Graphs and Formulas

29. Click to edit Master title style and for two-line headings Click to edit Master text styles

30. CHAPTER 1: Economics: Foundations and Models

31. c h a p t e r o n e

32. Prepared by: Fernando & Yvonn Quijano

33. Click to edit Master text styles SSecond level TThird level FFourth level FFifth level

34. LEARNING OBJECTIVES

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39. 5 Many U.S., Japanese, and European firms have been moving the production of goods and services to other countries.

40. Scarcity The situation in which unlimited wants excee

41. LEARNING OBJECTIVE 1 Market A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. Marginal analysis Analysis that involves comparing marginal benefits and marginal costs. Three important ideas: PPeople are rational PPeople respond to economic incentives OOptimal decisions are made at the margin

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43. LEARNING OBJECTIVE 1 Should Apple produce an additional 300,000 iPods? IIn solving the problem, consider the fo

44. LEARNING OBJECTIVE 2 Trade-off The idea that because of scarcity, producing more of one good or service means producing less of another good or service. Three fundamental questions: WWhat goods and services will be produced? HHow will the goods and services be produced? WWho will receive the goods and services produced?

45. Centrally planned economy An economy in which the government decides how economic resources will be allocated. MMarket economy An economy in which the decisions of households and firms interacting in markets allocate economic resources.

46. Mixed economy An economy in which most economic decisions result from the interaction of buyers and sellers in markets, but in which the government plays a significant role in the allocation of resources.

47. Productive efficiency The situation in which a good or

48. LEARNING OBJECTIVE 3 To develop a model, economists generally follow these steps: DDecide on the assumptions

49. LEARNING OBJECTIVE 3 The Role of Assumptions in Economic Models EEconomic models make behavioral assumptions about the motives of consumers and firms. FForming and Testing Hypotheses in Economic Models

50. Economic variable Something measurable that can have different values, such as the wages of software programmers.