eco 2023 chapter 1

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INTRODUCTION TO ECONOMICS ANALYSIS

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DEFINITION & REASONSTO STUDY ECONOMICS

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THE ECONOMICS PROBLEMS

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THE ECONOMICS RESOURCES

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THE CIRCULAR FLOW

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DIFFERENCES: MICROECONOMICS & MACROECONOMICS

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DIFFERENCES: MICROECONOMICS & MACROECONOMICS

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Examples of microeconomic and macroeconomic concernsExamples of microeconomic and macroeconomic concerns

ProductionProduction PricesPrices IncomeIncome EmploymentEmployment

MicroeconomicsMicroeconomics Production/Output in Individual Industries and Businesses •How much steel•How many offices•How many cars

Price of Individual Goods and Services •Price of medical care•Price of gasoline•Food prices•Apartment rents

Distribution of Income and Wealth •Wages in the auto industry•Minimum wages•Executive salaries•Poverty

•Employment by Individual Businesses & Industries•Jobs in the steel industry•Number of employees in a firm

MacroeconomicsMacroeconomics National Production/Output •Total Industrial Output•Gross Domestic Product•Growth of Output

Aggregate Price Level •Consumer prices•Producer Prices•Rate of Inflation

National IncomeTotal wages and salaries  

Total corporate profits

Employment and Unemployment in the Economy •Total number of jobs•Unemployment rate

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RATIONAL SELF-INTEREST

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DIFFERENCES

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• A statement that represents an opinion, which cannot be proved/disproved.

• Normative economics, also called policy economics, analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action

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THE SCIENCE OF ECONOMICS ANALYSIS

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Modify Approach

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• Each point on the Cartesian Each point on the Cartesian plane is a combination of (X,Y) plane is a combination of (X,Y) values.values.

• The relationship between X and The relationship between X and Y is causal. For a given value of Y is causal. For a given value of X, there is a corresponding X, there is a corresponding value of Y, or X causes Y.value of Y, or X causes Y.

UNDERSTANDING GRAPHS

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• A A lineline is a continuous string of points, is a continuous string of points, or sets of (X,Y) values on the Cartesian or sets of (X,Y) values on the Cartesian plane.plane.

• The relationship between X and Y on The relationship between X and Y on this graph is negative. An increase in this graph is negative. An increase in the value of X leads to a decreasethe value of X leads to a decrease in the in the value of Y, and vice versa.value of Y, and vice versa.

READING BETWEEN THE LINES

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A A downward-slopingdownward-sloping line line describes a negative relationship describes a negative relationship between X and Y.between X and Y.

An An upward-slopingupward-sloping line line describes a positive relationship describes a positive relationship between X andbetween X and Y.Y.

POSITIVE AND NEGATIVE RELATIONSHIPS

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DIFFERENT SLOPE VALUES

b 5

100 5. b

7

100 7.

b 0

100 b

10

0

SLOPE = Change in the vertical distance Increase in horizontal distance

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UNDERSTANDING GRAPHSUNDERSTANDING GRAPHS

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CHAPTER SUMMARY

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