Chapter Objectives

Economic Perspective
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem
Society’s Economizing Problem
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word
1
Limits,
Alternatives,
Key Terms

End Show
and Choices
1-1 Copyright 2008 The McGraw-Hill Companies
 Chapter Objectives
• Economics Defined O 1.1
Chapter Objectives
Economic Perspective
– Economic Perspective
Theories Principles and Models
Macro and Microeconomics

• Role of Economic Theory

Individual’s Economizing Problem
Society’s Economizing Problem
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word
• Microeconomics and
Macroeconomics
• Scarce Resources
– The Economizing Problem
Key Terms • Production Possibilities
End Show

1-2 Copyright 2008 The McGraw-Hill Companies

 The Economic Perspective

Chapter Objectives
• Scarcity and Choice
Economic Perspective

Macro and Microeconomics –Opportunity Cost

Theories Principles and Models

Individual’s Economizing Problem

Society’s Economizing Problem

• Purposeful Behavior
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word

–Utility O 1.2

• Marginal Analysis O 1.3

–Marginal Benefits
–Marginal Costs
Key Terms

End Show

1-3 Copyright 2008 The McGraw-Hill Companies

 Theories Principles and Models

Chapter Objectives
• The Scientific Method
Economic Perspective

• Economic Principle
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem
Society’s Economizing Problem

–Generalizations
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word

–Other-Things-Equal
Assumption (ceteris O 1.4

paribus)
Key Terms –Graphical Expression
End Show

1-4 Copyright 2008 The McGraw-Hill Companies

 Macro and Microeconomics

Chapter Objectives
• Macroeconomics
Economic Perspective

–Aggregate
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem
Society’s Economizing Problem
Production Possibilities Model

• Microeconomics
Unemployment, Growth, and the Future
Last Word

–Individual Units
• Positive Economics
Key Terms • Normative Economics
End Show

1-5 Copyright 2008 The McGraw-Hill Companies

 Individual’s Economizing
Problem
• Limited Income
Chapter Objectives
Economic Perspective
• Unlimited Wants
Theories Principles and Models
Macro and Microeconomics

• A Budget Line
Individual’s Economizing Problem
Society’s Economizing Problem
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word
• Attainable and Unattainable
Combinations
• Tradeoffs & Opportunity
O 1.5
Costs
Key Terms
• Choice
End Show • Income Change W 1.1
1-6 Copyright 2008 The McGraw-Hill Companies
 Individual’s Economizing
Problem
GLOBAL PERSPECTIVE
Chapter Objectives
Economic Perspective Average Income, Selected Nations
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem
Society’s Economizing Problem
Country Per Capita Income 2004
Production Possibilities Model Switzerland $48,230
Unemployment, Growth, and the Future
Last Word United States 41,400
Japan 37,180
France 30,090
South Korea 13,980
Mexico 6,770
Brazil 3,090
China 1,290
Pakistan 600
Nigeria 390
Key Terms Rwanda 220
End Show
Liberia 110
Source: World Bank
1-7 Copyright 2008 The McGraw-Hill Companies
 Individual’s Economizing
Problem
Chapter Objectives
$120 Budget
Economic Perspective 12
Theories Principles andDVDs
Models Books
Macro and Microeconomics $20 $10
Individual’s Economizing Problem
10
6
Society’s Economizing Problem
Production Possibilities Model
Unemployment, Growth, and the Future
0 Income = $120
=6

Quantity of DVDs
Last Word
5 2 8 Pdvd = $20

4 4 6
Unattainable

3 6
Income = $120
2 8 4
Pb = $10
= 12

1 10 2 Attainable

Key Terms
0 12
0
End Show 2 4 6 8 10 12 14
Quantity of Books
1-8 Copyright 2008 The McGraw-Hill Companies
 Society’s Economizing
Problem
Chapter Objectives
• Scarce Resources
• Resource Categories
Economic Perspective
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem

–Land
Society’s Economizing Problem
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word

–Labor
–Capital
• Investment
–Entrepreneurial Ability
Key Terms

End Show • Factors of Production

1-9 Copyright 2008 The McGraw-Hill Companies
 Production Possibilities Model

Chapter Objectives
• Full Employment
• Fixed Resources
Economic Perspective
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem

• Fixed Technology
Society’s Economizing Problem
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word

• Two Goods
–Consumer Goods
(Pizzas)
Key Terms
–Capital Goods
End Show
(Industrial Robots)
1-10 Copyright 2008 The McGraw-Hill Companies
 Production Possibilities Model
Production Possibilities Table
Chapter Objectives
Economic Perspective
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem Production Alternatives
Society’s Economizing Problem
Type of Product
Production Possibilities Model
Unemployment, Growth, and the Future
A B C D E
Last Word

Pizzas 0 1 2 3 4
(in hundred thousands)

Industrial Robots 10 9 7 4 0
(in thousands)

Key Terms
Plot Points to Create Graph…
End Show

1-11 Copyright 2008 The McGraw-Hill Companies

 Production Possibilities Model
Production Possibilities Curve
A’
Chapter Objectives 14
Economic Perspective 13
Theories Principles and Models B’ Unattainable G 1.1
Macro and Microeconomics 12
Individual’s Economizing Problem 11
Society’s Economizing Problem A
Production Possibilities Model
Unemployment, Growth, and the Future
10
Industrial Robots
9
B C’ Economic
Last Word
8
C
Growth
7
6
D’
5
D
4
3 Now Attainable
2 Attainable
1 E E’
Key Terms 0 1 2 3 4 5 6 7 8 9
End Show
Pizzas

1-12 Copyright 2008 The McGraw-Hill Companies

 Production Possibilities Model
Production Possibilities Curve
A’
Chapter Objectives 14
Economic Perspective 13
Theories Principles and Models B’ Unattainable
Macro and Microeconomics 12
Individual’s Economizing Problem 11
Society’s Economizing Problem A
Production Possibilities Model 10
Law of Increasing
Industrial Robots
Unemployment, Growth, and the Future B C’
Last Word 9
8
C Opportunity Cost
7
6
D’
5
D
Shape of
4
3
the Curve
2 Attainable
1 E E’ W 1.2
Key Terms 0 1 2 3 4 5 6 7 8 9
End Show
Pizzas

1-13 Copyright 2008 The McGraw-Hill Companies

 Production Possibilities Model
Production Possibilities Curve
A’
Chapter Objectives 14
Economic Perspective 13
Theories Principles and Models B’ Unattainable
Macro and Microeconomics 12
Individual’s Economizing Problem 11
Society’s Economizing Problem
Production Possibilities Model 10
Industrial Robots
Unemployment, Growth, and the Future C’
Last Word 9
8
7
6 U
D’
5
Under or
4 Unemployment
3
2
1 E’
Key Terms 0 1 2 3 4 5 6 7 8 9
End Show
Pizzas

1-14 Copyright 2008 The McGraw-Hill Companies

 Production Possibilities Model
Optimal Allocation of Resources
Chapter Objectives
Economic Perspective

Marginal Benefit & Marginal Cost

MC
Theories Principles and Models
Macro and Microeconomics a c
Individual’s Economizing Problem 15
Society’s Economizing Problem
Production Possibilities Model MB = MC
Unemployment, Growth, and the Future
Last Word

10 e

5
b d
MB

Key Terms 0 1 2 3
End Show Quantity of Pizza

1-15 Copyright 2008 The McGraw-Hill Companies

 Unemployment Growth
and the Future
Chapter Objectives
Economic Perspective
• A Growing Economy
Theories Principles and Models

• Economic Growth
Macro and Microeconomics
Individual’s Economizing Problem
Society’s Economizing Problem
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word
–Increasing Resource
Supplies
–Increasing Resource
Quality
Key Terms

End Show
–Technological Advances
1-16 Copyright 2008 The McGraw-Hill Companies
 Present Choices & Future
Possibilities
G 1.2

Chapter Objectives
Compare Two Hypothetical Economies
Economic Perspective
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem
Goods for the Future

Goods for the Future

Society’s Economizing Problem Future Future
Production Possibilities Model
Unemployment, Growth, and the Future Curve Curve
Last Word F

Current P Current
Curve Curve

Goods for the Present Goods for the Present

Presentville Futureville
Key Terms

End Show
Implications of International Trade
1-17 Copyright 2008 The McGraw-Hill Companies
 Pitfalls to Sound Economic
L ast Reasoning
ord
Chapter Objectives
W
Economic Perspective

• Biases
Theories Principles and Models
Macro and Microeconomics
Individual’s Economizing Problem
Society’s Economizing Problem

• Loaded Terminology
Production Possibilities Model
Unemployment, Growth, and the Future
Last Word

• Fallacy of Composition
• Post Hoc Fallacy
Key Terms
• Correlation but not
End Show Causation
1-18 Copyright 2008 The McGraw-Hill Companies
 Key Terms
• economics • economic resources
• economic perspective • land
Chapter Objectives
Economic Perspective
• opportunity cost • labor
Theories Principles and • Models
utility • capital
Macro and Microeconomics
Individual’s Economizing• Problem
marginal analysis
Society’s Economizing Problem • investment
Production Possibilities• Model
scientific method
Unemployment, Growth, and the Future
• • entrepreneurial ability
Last Word economic principle
• factors of production
• other-things-equal assumption
• macroeconomics • consumer goods
• aggregate • capital goods
• microeconomics • production possibilities cu
• positive economics • law of increasing opportun
• normative economics • economic growth
• economizing problem
Key Terms • budget line
End Show

1-19 Copyright 2008 The McGraw-Hill Companies

 Next Chapter Preview…
Chapter Objectives
Economic Perspective
Theories Principles and Models
The Market
Macro and Microeconomics
Individual’s Economizing Problem
Society’s Economizing Problem
Production Possibilities Model
System and the
Unemployment, Growth, and the Future
Last Word
Circular Flow

Key Terms

End Show

1-20 Copyright 2008 The McGraw-Hill Companies