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Chapter
1
The Scope and Method
of Economics
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2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair
PART I INTRODUCTION TO ECONOMICS
Chapter Outline
of Economics
An Invitation
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THE SCOPE AND METHOD OF ECONOMICS
CHAPTER 1: The Scope and Method
Economics is the study of how individuals and societies choose to use the scarce
resources that nature and previous generations have provided. The key word in this
definition is choose. Economics is a behavioral, or social, science. In large measure it is
the study of how people make choices. The choices that people make, when added up,
translate into societal choices.
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WHY STUDY ECONOMICS?
economics:
to learn a way of thinking,
of Economics
to understand society,
to understand global affairs, and
to be an informed voter.
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WHY STUDY ECONOMICS?
Opportunity cost
Marginalism, and
Efficient markets
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WHY STUDY ECONOMICS?
Opportunity Cost
CHAPTER 1: The Scope and Method
scarce Limited.
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WHY STUDY ECONOMICS?
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WHY STUDY ECONOMICS?
The study of economics teaches us a way of thinking and helps us make decisions.
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WHY STUDY ECONOMICS?
TO UNDERSTAND SOCIETY
CHAPTER 1: The Scope and Method
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WHY STUDY ECONOMICS?
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WHY STUDY ECONOMICS?
TO BE AN INFORMED VOTER
CHAPTER 1: The Scope and Method
A knowledge of economics is
of Economics
When we participate in the political process, we are voting on issues that require a
basic understanding of economics.
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THE SCOPE OF ECONOMICS
How much steel Price of medical care Wages in the auto Jobs in the steel
How much office Price of gasoline industry industry
space Food prices Minimum wage Number of employees
How many cars Apartment rents Executive salaries in a firm
Poverty Number of
accountants
Total industrial output Consumer prices Total wages and Total number of jobs
Gross domestic Producer prices salaries Unemployment rate
product Rate of inflation Total corporate
Growth of output profits
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THE METHOD OF ECONOMICS
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THE METHOD OF ECONOMICS
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THE METHOD OF ECONOMICS
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THE METHOD OF ECONOMICS
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THE METHOD OF ECONOMICS
Using the device of ceteris paribus is one part of the process of abstraction. In formulating
economic theory, the concept helps us simplify reality to focus on the relationships
that interest us.
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THE METHOD OF ECONOMICS
Equations
of Economics
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THE METHOD OF ECONOMICS
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THE METHOD OF ECONOMICS
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THE METHOD OF ECONOMICS
Economics
of Economics
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THE METHOD OF ECONOMICS
ECONOMIC POLICY
CHAPTER 1: The Scope and Method
1. Efficiency
2. Equity
3. Growth
4. Stability
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THE METHOD OF ECONOMICS
Efficiency
CHAPTER 1: The Scope and Method
efficiency In economics,
allocative efficiency. An efficient
of Economics
Equity
equity Fairness.
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THE METHOD OF ECONOMICS
Growth
CHAPTER 1: The Scope and Method
Stability
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AN INVITATION
CHAPTER 1: The Scope and Method
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Review Terms and Concepts
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Appendix
A graph is a two-
of Economics
dimensional
representation of a
set of numbers, or
data.
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Appendix
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Appendix
COORDINATE SYSTEM
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Appendix
An upward-sloping A downward-sloping
CHAPTER 1: The Scope and Method
FIGURE 1A.4 A Curve with (a) Positive Slope and (b) Negative Slope
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Appendix
CHAPTER 1: The Scope and Method
of Economics
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Appendix
CHAPTER 1: The Scope and Method
of Economics