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Limits, Alternatives, and Choices

Ekonomi Mikro Ch 1. Limits, Alternatives, and Choices

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JESSICA ERMANILDA ANGKIRIWANG ,
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39 views

Limits, Alternatives, and Choices

Ekonomi Mikro Ch 1. Limits, Alternatives, and Choices

Uploaded by

JESSICA ERMANILDA ANGKIRIWANG ,
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 15

Chapter 1

Limits, Alternatives, and Choices

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Economics

• Economics
• A social science concerned with making
optimal choices under conditions of scarcity
• Economic wants exceed society’s productive
capacity

LO1 1-2
The Economic Perspective

• Economic perspective
• Scarcity and choice
• Opportunity cost
• Purposeful behavior to increase utility
• Marginal analysis

LO1 1-3
Scarcity and Choice

• Resources are scarce


• Choices must be made
• Opportunity cost
• There’s no free lunch

LO1 1-4
Purposeful Behavior

• Rational self-interest
• Individuals and utility
• Firms and profit
• Desired outcome

LO1 1-5
Marginal Analysis

• Marginal benefit
• Marginal cost
• Marginal means “extra”
• Comparison between marginal benefit and
marginal cost

LO1 1-6
Theories, Principles, and Models

• The scientific method

Observe Formulate a hypothesis Test the hypothesis

Accept, reject, or modify the hypothesis

Continue to test the hypothesis, if necessary

LO2 1-7
Micro and Macro

• Microeconomics
• The study of the individual consumer, firm,
or market
• Macroeconomics
• The study of the entire economy or a major
aggregate of the economy

LO3 1-8
The Economizing Problem

• The economizing problem


• Limited income and unlimited wants
• The budget line
• Attainable and unattainable combinations
• Trade-offs and opportunity costs

LO4 1-9
Society’s Economizing Problem

• 4 categories of economic resources


• Land
• Labor
• Capital
• Investment
• Entrepreneurial ability

LO5 1-10
Production Possibilities Model

• Economic model that shows different


combinations of two goods that an economy
can produce
• Full employment
• Fixed resources
• Fixed technology
• 2-good economy
• Consumer goods and capital goods
LO6 1-11
Increasing Opportunity Costs

• Law of increasing opportunity costs


• As more of a particular good is produced,
its marginal opportunity costs increase
• Production possibilities curve
• Concave shape
• Economic rationale

LO6 1-12
Unemployment, Growth, & the
Future
• Economic growth
14 A’
13
B’
12
11
A Unattainable
10
B C’
Industrial robots

9
8
C
7
6
D’
5
D
4
3 Now attainable
2 Attainable
1 E E’
0 1 2 3 4 5 6 7 8 9
LO7 Pizzas 1-13
Present Choices, Future
Possibilities

Future Future
Goods for the future

Goods for the future


Curve Curve
F

Current P Current
curve curve

Goods for the present Goods for the present

Presentville Futureville

LO7 1-14
Pitfalls to Sound Economic
Reasoning

• Biases
• Loaded terminology
• Fallacy of composition
• Post hoc fallacy
• Correlation not causation

1-15

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