AN INTRODUCTION TO ECONOMIC AND THE ECONOMY Essay

Submitted By Rounak-Tulshan
Words: 877
Pages: 4
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Chapter 1

PART 1: AN INTRODUCTION
TO ECONOMICS
AND THE ECONOMY

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Chapter 1

List the ten key concepts to retain for a lifetime.
Define economics and the features of the economic way of thinking.
Describe the role of economic theory in economics.
Distinguish between microeconomics and macroeconomics, and between positive economics and normative economics.
 List the categories of scarce resources and delineate the economic problem.  Apply production possibilities analysis, increasing opportunity costs, and economic growth.
 Explain how economic growth and international trade increase consumption possibilities.





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1.1 Ten Key Concepts
The Individual
1.
2.
3.
4.

Facing trade-offs
Opportunity Costs
Choosing a Little More or Less
The Influence of Incentives

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1.1 Ten Key Concepts
Interaction Among
Individuals
5. Specialization and Trade
6. The Effectiveness of Markets
7. The Role of Governments

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1.1 Ten Key Concepts
The Economy as a Whole and the Standard of Living
8. Production and the Standard of
Living
9. Money & Inflation
10.Inflation-Unemployment Trade-off

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Chapter 1

Scarcity and Choice
Purposeful Behaviour
Marginal Analysis: Benefits and Costs

1.3 Theories, Principles and
Models
Chapter 1

 The scientific method:
 Observe the world
 Formulate hypotheses
 Test by comparing actual outcomes to the hypothesized predictions  Accept, reject, modify hypotheses as indicated
 Continue testing against the facts

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1.3 Theories, Principles and
Models
Chapter 1

Deriving Theories
Terminology
Generalizations
Other-Things-Equal Assumption
Graphical Expression

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 Microeconomics examines
 Individual units (household, firm or industry) and their decision making process

 Macroeconomics examines
 The whole economy
 The subdivisions or aggregates

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 Positive economics
 The analysis of facts to establish cause-and-effect relationships.

 Normative economics
 The part of economics involving value judgments about what the economy should be like.

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Economic problem
Limited Income
Unlimited Wants

[T2]Ed: Place Pakistan ahead of Nigeria

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Country
Switzerland
United States
Canada
France
Japan
South Korea
Brazil
Mexico
China
Pakistan
Nigeria
Rwanda
Liberia

Per Capita Income, 2010
(U.S. dollars, based on exchange rates)
70,350
47,140
41,950
42,390
42,150
19,890
9,390
9,330
7,560
2,780
2,160
1,180
330

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A budget line
Attainable and unattainable options
Tradeoffs and opportunity costs
Make the best choice possible

Change in income
LO4

1-13

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12

DVDs Books
$20
$10

10

6
0
5
2
4
4
3
6
2
8
1 10
0 12

Quantity of DVDs

$120 Budget

Income = $120
=6
Pdvd = $20

8

Unattainable

6
Income = $120
= 12
Pb = $10

4
2
0

Attainable

2

4

6

8

10

12

Quantity of Paperback Books

LO4

14
1-14

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Scarce Resources






Land
Capital
Human Resources
Labour
Entrepreneurial Ability
▪
▪
▪
▪

LO4

takes initiative makes policy decisions innovates bears risk

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 Illustrates production choices
 Assumptions:





Full employment
Fixed resources
Fixed technology
Two goods

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Production Alternatives
Type of Product

Pizzas

A

B

C

D

E

0

1

2

3

4

10

9

7

4

0

(in hundred thousands)

Industrial Robots
(in thousands)

Plot the Points to Create the Graph
Chapter 1

LO5

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