際際滷

際際滷Share a Scribd company logo

econ2_micro_ch01.ppt

Download as PPT, PDF
Montpellier Business School, France
Montpellier Business School, France

This document provides an overview of key concepts in microeconomics from an introductory economics textbook. It discusses: 1) The basic economic problem of scarcity and how resources, goods, services, and markets work. It introduces the circular flow model showing the flow of resources and payments between households and firms. 2) How individuals and firms make rational economic decisions by weighing costs and benefits at the margin. It also distinguishes between microeconomics and macroeconomics. 3) How economics uses the scientific method to develop theories and test hypotheses about economic behavior. It differentiates positive and normative economic statements. 4) Some common pitfalls to avoid in economic analysis like ignoring secondary effects.

1 of 39
Download to read offline
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 1 ECON Designed by Amy McGuire, B-books, Ltd. McEachern 2010-2011 1 CHAPTER The Art and Science of Economic Analysis Micro
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 2 LO1 The Economic Problem Wants, desires: unlimited Resources: scarce Economic choice Economics How people use scarce resources to satisfy unlimited wants
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 3 LO1 Resources Inputs; factors of production Used to produce goods and services Goods and services are scarce because resources are scarce 1. Labor 2. Capital 3. Natural Resources 4. Entrepreneurial ability
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 4 LO1 Resources Labor human effort Physical effort Mental effort Time Payment: Wage Capital human creations Physical capital Human capital Payment: Interest
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 5 LO1 Resources Natural resources Gifts of nature Renewable Exhaustible Payment: Rent Entrepreneurial ability Talent, idea Risk of operation Payment: Profit
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 6 LO1 Goods and Services Good: see, feel, touch Service: intangible Scarce good/service The amount people desire exceeds the amount available at zero price Choice Give up some goods and services
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 7 LO1 Goods and Services Bads We want none of them; not even at a zero price Free goods and services There is no such thing as a free lunch Involve a cost to someone
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 8 LO1 Economic Decision Makers Households Consumers Demand goods and services Resource owners Supply resources Firms, Governments, Rest of the World Demand resources Produce goods and services
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 9 LO1 Markets Bring together buyers and sellers Determine price and quantity Product markets Goods and services Resource markets Resources
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 10 LO1 A Simple Circular-Flow Model Flow of Resources Products Income Revenue Among economic decision makers Interaction Households Firms
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 11 LO1 The Simple Circular-Flow Model for Households and Firms Exhibit 1 Households - Supply resources to resource market; earn income - Demand goods and services from product market; spend income Firms - Demand resources to produce goods and services; payment for resources - Supply goods and services to product market; earn revenue
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 12 Rational Self-Interest LO2 Individuals are rational Make the best choice Given the available information Maximize expected benefit With a given cost Minimize expected cost For a given benefit The lower the personal cost of helping others, the more help we offer
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 13 Choice Requires Time and Information LO2 Time and information scarce; valuable Rational decision makers Willing to pay for information Improve choices Acquire information Additional benefit expected exceeds the additional cost
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 14 Economic Analysis Is Marginal Analysis LO2 Expected marginal benefit Expected marginal cost Marginal Incremental, additional, extra Rational decision maker: Change the status quo if expected marginal benefit exceeds expected marginal cost
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 15 Microeconomics and Macroeconomics LO2 Microeconomics Individual economic choices Markets coordinate the choices of economic decision makers Individual pieces of the puzzle Macroeconomics Performance of the economy as a whole Big picture
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 16 The Science of Economic Analysis LO3 Economic theory / model Simplification of economic reality Important elements of the problem Make predictions about the real word Good theory Guide Sort, save, understand information
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 17 The Scientific Method LO3 1. Identify the question and define relevant variables 2. Specify assumptions Other-things-constant Behavioral assumptions 3. Formulate the hypothesis Key variables relate to each other 4. Test the hypothesis - evidence
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 18 LO3 The Scientific Method: Step by Step 1. Identify the Question and Define Relevant Variables 2. Specify Assumptions or 3. Formulate a hypothesis 4. Test the hypothesis Reject the hypothesis Use the hypothesis until a better one comes along Modify Approach Exhibit 2
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 19 Normative Versus Positive LO3 Positive economic statement Assertion about economic reality Supported or rejected by evidence True or false What is Normative economic statement Opinion What should be
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 20 LO3 Case Study A Yen for Vending Machines Japan lower unemployment Low birthrate No immigration Aging population Vending machines Wider variety of products Preferred
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 21 Predicting Average Behavior LO3 Individual behavior Difficult to predict Random actions of individuals Offset one another Average behavior of groups Predicted more accurately
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 22 Pitfalls of Faulty Economic Analysis LO4 The fallacy that association is causation Event A caused event B associated in time The fallacy of composition What is true for the individual is true for the group The mistake of ignoring the secondary effects Unintended consequences
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 23 LO5 Case Study College Major and Annual Earnings College degree Better jobs Higher pay Median annual earnings Men: $43,199 Women: $32,155 Major in economics Rank: #7 No gap between men and women
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 24 LO5 Exhibit 3 Median Annual Earnings of 35- to 44-Year-Olds with Bachelors as Highest Degree, by Major
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 25 Understanding Graphs Appendix Origin Horizontal axis Vertical axis Graph Functional relation Dependent variable Independent variable
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 26 Exhibit 4 15 10 5 20 y Vertical axis a b 0 Origin 20 15 10 5 x Horizontal axis Point a: - 5 units X - 15 units Y Point b: - 10 units X - 5 units Y Basics of a Graph
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 27 U.S. Unemployment Rate Since 1900 Exhibit 5
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 28 Drawing Graphs Dependent variable Depends on the independent variable Types of relations between variables Positive; direct Negative; inverse Independent; unrelated Appendix
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 29 Exhibit 6; Exhibit 7 a b c d e Hours driven per day Distance traveled per day (miles) a b c d e 1 2 3 4 5 50 100 150 200 250 0 4 3 2 1 Hours driven per day 5 150 100 50 200 Distance traveled per day (miles) 250 Points a through e depict different combinations of hours driven per day and the corresponding distances traveled. Connecting these points graphs a line. Schedule and Graph Relating Distance Traveled to Hours Driven
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 30 Slopes of Straight Lines Slope Change in vertical variable For a given increase in horizontal variable Slope = Change in the vertical distance/ Increase in the horizontal distance Slope of a straight line The same value along the line Appendix
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 31 Alternative Slopes for Straight Lines (a) Positive relation 0 x 20 10 10 15 20 y 5 10 Slope = 5/10 = 0.5 (b) Negative relation 0 x 20 10 10 3 20 y 10 Slope = - 7/10 = 0.7 -7 Exhibit 8(a), (b)
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 32 Alternative Slopes for Straight Lines (c) No relation: zero slope 0 x 20 10 10 20 y Slope = 0/10 = 0 (d) No relation: infinite slope 0 x 10 10 20 y 10 Slope = 10/0 = 10 Exhibit 8(c), (d)
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 33 Slope, Units of Measurement, Marginal Analysis Value of slope Depends on units of measurement Measures marginal effects Appendix
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 34 (a) Measured in feet (b) Measured in yards 0 Feet of copper tubing 6 5 5 $6 Total cost 1 1 Slope = 1/1 = 1 0 Yards of copper tubing 2 1 3 $6 Total cost 3 1 Slope = 3/1 = 3 Slope Depends on the Unit of Measure (a) Output is measured in feet of copper tubing. (b) Output is measured in yards. The cost: $1 per foot. Slope is different: copper tubing is measured using different units Exhibit 9
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 35 The Slopes of Curved Lines Differs along the curve Slope of a curved line at one point Slope of the tangent Appendix
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 36 Slope at Different Points on a Curved Line 0 40 30 20 10 x 30 20 10 40 y a b B A The slope of a curved line varies from point to point. At point a, the slope of the curve is equal to the slope of the tangent A. At point b, the slope of the curve is equal to the slope of the tangent B. Exhibit 10
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 37 a Curves with Both Positive and Negative Slopes 0 x y b Some curves have both positive and negative slopes. The hill-shaped curve has: positive slope to the left of a slope of 0 at point a negative slope to the right of a. The U-shaped curve has: negative slope to the left of b slope of 0 at point b positive slope to the right of b. Exhibit 11
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 38 Line Shifts Change assumptions Changed relationship between variables Line shift Appendix
Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 39 Shift of Line Relating Distance Traveled to Hours Driven Exhibit 12 0 4 3 2 1 Hours driven per day 5 150 100 50 200 Distance traveled per day (miles) 250 f T d T Line T hours driven/day and distance traveled/day average speed = 50 mph Line T hours driven/day and distance traveled/day average speed = 40 mph

More Related Content

econ2_micro_ch01.ppt

  • 1. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 1 ECON Designed by Amy McGuire, B-books, Ltd. McEachern 2010-2011 1 CHAPTER The Art and Science of Economic Analysis Micro
  • 2. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 2 LO1 The Economic Problem Wants, desires: unlimited Resources: scarce Economic choice Economics How people use scarce resources to satisfy unlimited wants
  • 3. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 3 LO1 Resources Inputs; factors of production Used to produce goods and services Goods and services are scarce because resources are scarce 1. Labor 2. Capital 3. Natural Resources 4. Entrepreneurial ability
  • 4. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 4 LO1 Resources Labor human effort Physical effort Mental effort Time Payment: Wage Capital human creations Physical capital Human capital Payment: Interest
  • 5. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 5 LO1 Resources Natural resources Gifts of nature Renewable Exhaustible Payment: Rent Entrepreneurial ability Talent, idea Risk of operation Payment: Profit
  • 6. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 6 LO1 Goods and Services Good: see, feel, touch Service: intangible Scarce good/service The amount people desire exceeds the amount available at zero price Choice Give up some goods and services
  • 7. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 7 LO1 Goods and Services Bads We want none of them; not even at a zero price Free goods and services There is no such thing as a free lunch Involve a cost to someone
  • 8. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 8 LO1 Economic Decision Makers Households Consumers Demand goods and services Resource owners Supply resources Firms, Governments, Rest of the World Demand resources Produce goods and services
  • 9. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 9 LO1 Markets Bring together buyers and sellers Determine price and quantity Product markets Goods and services Resource markets Resources
  • 10. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 10 LO1 A Simple Circular-Flow Model Flow of Resources Products Income Revenue Among economic decision makers Interaction Households Firms
  • 11. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 11 LO1 The Simple Circular-Flow Model for Households and Firms Exhibit 1 Households - Supply resources to resource market; earn income - Demand goods and services from product market; spend income Firms - Demand resources to produce goods and services; payment for resources - Supply goods and services to product market; earn revenue
  • 12. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 12 Rational Self-Interest LO2 Individuals are rational Make the best choice Given the available information Maximize expected benefit With a given cost Minimize expected cost For a given benefit The lower the personal cost of helping others, the more help we offer
  • 13. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 13 Choice Requires Time and Information LO2 Time and information scarce; valuable Rational decision makers Willing to pay for information Improve choices Acquire information Additional benefit expected exceeds the additional cost
  • 14. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 14 Economic Analysis Is Marginal Analysis LO2 Expected marginal benefit Expected marginal cost Marginal Incremental, additional, extra Rational decision maker: Change the status quo if expected marginal benefit exceeds expected marginal cost
  • 15. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 15 Microeconomics and Macroeconomics LO2 Microeconomics Individual economic choices Markets coordinate the choices of economic decision makers Individual pieces of the puzzle Macroeconomics Performance of the economy as a whole Big picture
  • 16. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 16 The Science of Economic Analysis LO3 Economic theory / model Simplification of economic reality Important elements of the problem Make predictions about the real word Good theory Guide Sort, save, understand information
  • 17. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 17 The Scientific Method LO3 1. Identify the question and define relevant variables 2. Specify assumptions Other-things-constant Behavioral assumptions 3. Formulate the hypothesis Key variables relate to each other 4. Test the hypothesis - evidence
  • 18. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 18 LO3 The Scientific Method: Step by Step 1. Identify the Question and Define Relevant Variables 2. Specify Assumptions or 3. Formulate a hypothesis 4. Test the hypothesis Reject the hypothesis Use the hypothesis until a better one comes along Modify Approach Exhibit 2
  • 19. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 19 Normative Versus Positive LO3 Positive economic statement Assertion about economic reality Supported or rejected by evidence True or false What is Normative economic statement Opinion What should be
  • 20. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 20 LO3 Case Study A Yen for Vending Machines Japan lower unemployment Low birthrate No immigration Aging population Vending machines Wider variety of products Preferred
  • 21. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 21 Predicting Average Behavior LO3 Individual behavior Difficult to predict Random actions of individuals Offset one another Average behavior of groups Predicted more accurately
  • 22. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 22 Pitfalls of Faulty Economic Analysis LO4 The fallacy that association is causation Event A caused event B associated in time The fallacy of composition What is true for the individual is true for the group The mistake of ignoring the secondary effects Unintended consequences
  • 23. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 23 LO5 Case Study College Major and Annual Earnings College degree Better jobs Higher pay Median annual earnings Men: $43,199 Women: $32,155 Major in economics Rank: #7 No gap between men and women
  • 24. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 24 LO5 Exhibit 3 Median Annual Earnings of 35- to 44-Year-Olds with Bachelors as Highest Degree, by Major
  • 25. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 25 Understanding Graphs Appendix Origin Horizontal axis Vertical axis Graph Functional relation Dependent variable Independent variable
  • 26. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 26 Exhibit 4 15 10 5 20 y Vertical axis a b 0 Origin 20 15 10 5 x Horizontal axis Point a: - 5 units X - 15 units Y Point b: - 10 units X - 5 units Y Basics of a Graph
  • 27. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 27 U.S. Unemployment Rate Since 1900 Exhibit 5
  • 28. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 28 Drawing Graphs Dependent variable Depends on the independent variable Types of relations between variables Positive; direct Negative; inverse Independent; unrelated Appendix
  • 29. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 29 Exhibit 6; Exhibit 7 a b c d e Hours driven per day Distance traveled per day (miles) a b c d e 1 2 3 4 5 50 100 150 200 250 0 4 3 2 1 Hours driven per day 5 150 100 50 200 Distance traveled per day (miles) 250 Points a through e depict different combinations of hours driven per day and the corresponding distances traveled. Connecting these points graphs a line. Schedule and Graph Relating Distance Traveled to Hours Driven
  • 30. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 30 Slopes of Straight Lines Slope Change in vertical variable For a given increase in horizontal variable Slope = Change in the vertical distance/ Increase in the horizontal distance Slope of a straight line The same value along the line Appendix
  • 31. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 31 Alternative Slopes for Straight Lines (a) Positive relation 0 x 20 10 10 15 20 y 5 10 Slope = 5/10 = 0.5 (b) Negative relation 0 x 20 10 10 3 20 y 10 Slope = - 7/10 = 0.7 -7 Exhibit 8(a), (b)
  • 32. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 32 Alternative Slopes for Straight Lines (c) No relation: zero slope 0 x 20 10 10 20 y Slope = 0/10 = 0 (d) No relation: infinite slope 0 x 10 10 20 y 10 Slope = 10/0 = 10 Exhibit 8(c), (d)
  • 33. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 33 Slope, Units of Measurement, Marginal Analysis Value of slope Depends on units of measurement Measures marginal effects Appendix
  • 34. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 34 (a) Measured in feet (b) Measured in yards 0 Feet of copper tubing 6 5 5 $6 Total cost 1 1 Slope = 1/1 = 1 0 Yards of copper tubing 2 1 3 $6 Total cost 3 1 Slope = 3/1 = 3 Slope Depends on the Unit of Measure (a) Output is measured in feet of copper tubing. (b) Output is measured in yards. The cost: $1 per foot. Slope is different: copper tubing is measured using different units Exhibit 9
  • 35. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 35 The Slopes of Curved Lines Differs along the curve Slope of a curved line at one point Slope of the tangent Appendix
  • 36. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 36 Slope at Different Points on a Curved Line 0 40 30 20 10 x 30 20 10 40 y a b B A The slope of a curved line varies from point to point. At point a, the slope of the curve is equal to the slope of the tangent A. At point b, the slope of the curve is equal to the slope of the tangent B. Exhibit 10
  • 37. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 37 a Curves with Both Positive and Negative Slopes 0 x y b Some curves have both positive and negative slopes. The hill-shaped curve has: positive slope to the left of a slope of 0 at point a negative slope to the right of a. The U-shaped curve has: negative slope to the left of b slope of 0 at point b positive slope to the right of b. Exhibit 11
  • 38. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 38 Line Shifts Change assumptions Changed relationship between variables Line shift Appendix
  • 39. Chapter 1 Copyright 息2010 by South-Western, a division of Cengage Learning. All rights reserved 39 Shift of Line Relating Distance Traveled to Hours Driven Exhibit 12 0 4 3 2 1 Hours driven per day 5 150 100 50 200 Distance traveled per day (miles) 250 f T d T Line T hours driven/day and distance traveled/day average speed = 50 mph Line T hours driven/day and distance traveled/day average speed = 40 mph

Editor's Notes