Chapter Objectives

Economic
Perspective
Theories
Principles and
Models
Macro and
Microeconomics
Individual’s
1
Economizing
Problem
Society’s
Economizing
Problem
Production
Possibilities Model
Limits,
Unemployment,
Growth, and the
Future
Last Word
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
Theories
–Economic Perspective
• Role of Economic Theory
Principles and
Models
Macro and
Microeconomics
Individual’s
Economizing
Problem
• Microeconomics and
Society’s
Economizing
Problem
Macroeconomics
• Scarce Resources
Production
Possibilities Model
Unemployment,
Growth, and the
Future
Last Word –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
Theories
Principles and
–Opportunity Cost
Models

• Purposeful Behavior
Macro and
Microeconomics
Individual’s
Economizing

–Utility
Problem
Society’s
Economizing O 1.2
Problem

• Marginal Analysis
Production
Possibilities Model
Unemployment,
Growth, and the O 1.3
Future
Last Word
–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 Principle
Economic
Perspective
Theories
Principles and
Models
Macro and
Microeconomics
Individual’s
Economizing
–Generalizations
–Other-Things-Equal
Problem
Society’s
Economizing
Problem
Production
Possibilities Model
Unemployment,
Assumption (ceteris O 1.4
Growth, and the
Future
Last Word
paribus)
Key Terms –Graphical Expression
End Show

1-4 Copyright 2008 The McGraw-Hill Companies

 Macro and Microeconomics

Chapter Objectives
Economic
• Macroeconomics
–Aggregate
Perspective
Theories
Principles and
Models
Macro and
Microeconomics
Individual’s
Economizing
Problem
• Microeconomics
Society’s
Economizing
Problem
Production
–Individual Units
Possibilities Model

• Positive Economics
Unemployment,
Growth, and the
Future
Last Word

Key Terms • Normative Economics

End Show

1-5 Copyright 2008 The McGraw-Hill Companies

 Individual’s Economizing
Problem
Chapter Objectives
• Limited Income
Economic
Perspective
Theories
• Unlimited Wants
•
Principles and
Models
Macro and A Budget Line
Microeconomics
Individual’s
Economizing
Problem
• Attainable and Unattainable
Society’s
Economizing
Problem
Combinations
•
Production
Possibilities Model
Unemployment,
Tradeoffs & Opportunity O 1.5
Growth, and the
Future
Last Word
Costs
Key Terms
• Choice
End Show • Income Change W 1.1
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 Individual’s Economizing
Problem
GLOBAL PERSPECTIVE
Chapter Objectives
Economic
Perspective
Average Income, Selected Nations
Theories
Principles and
Models
Country Per Capita Income 2004
Macro and Switzerland $48,230
Microeconomics
Individual’s United States 41,400
Economizing
Problem
Japan 37,180
Society’s France 30,090
Economizing
Problem South Korea 13,980
Production
Possibilities Model
Mexico 6,770
Unemployment, Brazil 3,090
Growth, and the
Future China 1,290
Last Word
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
Economic
$120 Budget 12
Perspective DVDs Books
Theories $20 $10
Principles and 10
Models
Macro and
Microeconomics
6 0 Income = $120
=6

Quantity of DVDs
Individual’s
Economizing 5 2 8 Pdvd = $20
Problem
Society’s
Economizing
4 4 6
Unattainable
Problem
Production
Possibilities Model
3 6
4 Income = $120
Unemployment,
Growth, and the 2 8 Pb = $10
= 12
Future
Last Word 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

–Land
Models
Macro and
Microeconomics
Individual’s

–Labor
Economizing
Problem
Society’s
Economizing
Problem
Production
Possibilities Model
–Capital
• Investment
Unemployment,
Growth, and the
Future
Last Word

Key Terms
–Entrepreneurial Ability
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

• Fixed Technology
Models
Macro and
Microeconomics
Individual’s

• Two Goods
Economizing
Problem
Society’s
Economizing

–Consumer Goods
Problem
Production
Possibilities Model
Unemployment,
Growth, and the
Future (Pizzas)
Last Word

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 Production Alternatives
Models
Macro and Type of Product A B C D E
Microeconomics
Individual’s
Economizing
Problem Pizzas 0 1 2 3 4
Society’s
Economizing (in hundred thousands)
Problem
Production
Possibilities Model
Unemployment,
Growth, and the Industrial Robots 10 9 7 4 0
Future (in thousands)
Last Word

Key Terms
Plot Points to Create Graph…
End Show

1-11 Copyright 2008 The McGraw-Hill Companies

 Production Possibilities Model
Production Possibilities Curve
14 A’
Chapter Objectives
Economic 13
Perspective
12 B’ Unattainable G 1.1
Theories
Principles and 11
Models A
10
Macro and
Microeconomics
Industrial Robots
9
B C’ Economic
Individual’s
Economizing 8
C
Growth
Problem
Society’s 7
Economizing 6
Problem D’
Production 5
Possibilities Model D
Unemployment,
4
Growth, and the 3 Now Attainable
Future
Last Word 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
14 A’
Chapter Objectives
Economic 13
Perspective
12 B’ Unattainable
Theories
Principles and 11
Models A
Macro and Industrial Robots 10
Microeconomics
Individual’s
9
B C’ Law of Increasing
Economizing
Problem
8
C Opportunity Cost
Society’s 7
Economizing 6
Problem D’
Production
Possibilities Model
5
D
Shape of
4
Unemployment,
Growth, and the 3
the Curve
Future
Last Word 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
14 A’
Chapter Objectives
Economic 13
Perspective
12 B’ Unattainable
Theories
Principles and 11
Models
Macro and Industrial Robots 10
Microeconomics C’
Individual’s
9
Economizing 8
Problem
Society’s 7
Economizing 6 U
Problem D’
Production 5
Possibilities Model
Under or
4
Unemployment, Unemployment
Growth, and the 3
Future
Last Word 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

Marginal Benefit & Marginal Cost

Perspective MC
Theories a c
Principles and
15
Models
Macro and MB = MC
Microeconomics
Individual’s
Economizing
Problem 10 e
Society’s
Economizing
Problem
Production
Possibilities Model
Unemployment, 5
Growth, and the
Future
b d
Last Word 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
• Economic Growth
Theories
Principles and
Models
Macro and
Microeconomics
Individual’s
Economizing
Problem
–Increasing Resource
Society’s
Economizing
Problem
Supplies
Production

–Increasing Resource
Possibilities Model
Unemployment,
Growth, and the
Future
Last Word
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
Goods for the Future

Goods for the Future

Models Future Future
Macro and
Microeconomics Curve Curve
Individual’s F
Economizing
Problem
Society’s
Economizing
Problem
Production Current P Current
Possibilities Model Curve Curve
Unemployment,
Growth, and the
Future
Last Word 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
Reasoning
Chapter Objectives
Economic

• Biases
Perspective
Theories
Principles and
Models

• Loaded Terminology
Macro and
Microeconomics
Individual’s
Economizing
Problem
Society’s
Economizing
Problem
Production
• Fallacy of Composition
• Post Hoc Fallacy
Possibilities Model
Unemployment,
Growth, and the
Future
Last Word

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
• opportunity cost • labor
Perspective • utility • capital
Theories
Principles and • marginal analysis
Models • investment
Macro and • scientific method
Microeconomics
• economic principle • entrepreneurial ability
Individual’s
Economizing
• other-things-equal • factors of production
Problem
Society’s assumption • consumer goods
Economizing
Problem • macroeconomics • capital goods
Production
Possibilities Model • aggregate • production
Unemployment,
Growth, and the
• microeconomics possibilities curve
Future
Last Word
• positive economics • law of increasing
• normative economics opportunity costs
Key Terms
• economizing problem • economic growth
• budget line
End Show

1-19 Copyright 2008 The McGraw-Hill Companies

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

Key Terms

End Show

1-20 Copyright 2008 The McGraw-Hill Companies