Chapter 1
Chapter 1
economic perspective.
2. Describe the role of economic theory in
economics.
3. Distinguish microeconomics from
macroeconomics and positive economics
from normative economics.
4. List the categories of scarce resources and
delineate the nature of the economizing
problem.
Economics defined
Purposeful Behavior
Economics assumes that human behavior
Purposeful Behavior
Purposeful behavior does not assume that
Purposeful Behavior
Rational self-interest is not the same as
Microeconomics and
Macroeconomics
Microeconomics The part of economics concerned with
A Budget Line
We can clarify the economizing problem
DVDs Books
$20
$10
10
60
52
44
36
28
110
012
LO4
Quantity of DVDs
$120 Budget
Income = $120
=6
Pdvd = $20
Unattainable
Income = $120
= 12
Pb = $10
4
Attainable
2
0
10
12
14
1-20
human resource.
Because land, labor, capital, and
entrepreneurial ability are combined to
produce goods and services, they are called
the factors of production, or simply inputs.
Production Possibilities
Model
Society uses its scarce resources to produce
Production Possibilities
Model
Full employment The economy is employing
Production Possibilities
Model
Pizzas symbolize consumer goods, products
Production Possibilities
Table
A production possibilities table lists the
Pizzas
(in hundred thousands)
Industrial Robots
(in thousands)
10
LO5
28-1
Production Possibilities
Curve
The data presented in a production
Industrial Robots
The law of
increasing
opportunity
costs
makes
the PPC
.concave
0
Pizzas
LO5
30-1
Optimal Allocation
\Optimal output: MB = MC. Achieving the
Industrial Robots
The law of
increasing
opportunity
costs
makes
the PPC
.concave
0
Pizzas
LO5
34-1
A Growing Economy
The increase in supplies of resources,
Industrial Robots
A Growing Economy
A
14
13
B
12
11
10 A
B
C
9
8
C
7
6
5
D
4
3
2 Attainable
1
E
9 8
Unattainable
Economic
Growth
D
Now Attainable
E
4
Pizzas
LO6
36-1
A Growing Economy
Economic growth is the result of
1) increases in supplies of resources,
2) improvements in resource quality,
3) technological advances
Current
Curve
Presentvill
e
LO6
Current
Curve
Futureville
40-1