economics: foundations and models. what happens when u.s. firms move to china? after studying

Economics:Foundations and Models

What Happens When U.S. Firms

Move to China? After studying

Economics: Foundations and Models

Building a Foundation: Economics and Individual

Decisions

Apple Computer Makes a Decision at the Margin

The Economic Problem That Every Society Must Solve


Centrally Planned Economies versus Market

Economies

Efficiency and Equity

Economic Models

Economic Models

Normative and Positive Analysis

Microeconomics and Macroeconomics

A Preview of Important Economic Terms

The Halo Effect

Allocative efficiency

CCentrally planned economy

EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket

Appendix 1A:Using Graphs and Formulas


Graphs of One Variable


Graphs of Two Variables

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Click to edit Master text styles

CHAPTER 1: Economics: Foundations and Models

c h a p t e r

o n e

Prepared by: Fernando & Yvonn Quijano


SSecond level

TThird level

FFourth level

FFifth level

LEARNING OBJECTIVES

5

Many U.S., Japanese, and European firms have been moving

the production of goods and services to other countries.

Scarcity The situation in which unlimited wants excee

LEARNING OBJECTIVE

1

Market A group of buyers and sellers of a good or service and the institution or arrangement by

which they come together to trade.

Marginal analysis Analysis that involves comparing marginal benefits and marginal costs.

Three important ideas:

PPeople are rational

PPeople respond to economic incentives

OOptimal decisions are made at the margin

LEARNING OBJECTIVE

1

Should Apple produce an additional 300,000 iPods?

IIn solving the problem, consider the fo

LEARNING OBJECTIVE

2

Trade-off The idea that because of scarcity, producing more of one good or service means producing less of another good or service.

Three fundamental questions:

WWhat goods and services will be produced?

HHow will the goods and services be produced?

WWho will receive the goods and services produced?

Centrally planned economy An economy in which the government decides how

economic resources will be allocated.

MMarket economy An economy in which the decisions of

households and firms interacting in markets allocate economic

resources.

Mixed economy An economy in which most economic decisions result from the interaction of buyers and sellers in markets, but in

which the government plays a significant role in the

allocation of resources.

Productive efficiency The situation in which a good or

LEARNING OBJECTIVE

3

To develop a model, economists generally follow these steps:

DDecide on the assumptions

LEARNING OBJECTIVE

3

The Role of Assumptions in Economic Models

EEconomic models make behavioral assumptions about the motives of consumers and firms.

FForming and Testing Hypotheses in Economic Models

Economic variable Something measurable that can have

different values, such as the wages of software

programmers.

Positive analysis Analysis concerned with what is.

NNormative analysis Analysis concerned with what ought to be.

Does outsourcing by U.S. firms raise or lower incomes in

the United States?When Economists Disagree: A

Debate Over Outsourcing

1 - 1

LEARNING OBJECTIVE

4

Microeconomics The study of

LEARNING OBJECTIVE

5

Entrepreneur

IInnovation

TTechnology

FFirm, company, or business

GGoods

SServices

RRevenue

Opportunity cost

PProfit

HHousehold

FFactors of production or economic resources

CCapital

HHuman capital

Figure 1: Many countries, including the United States, have experienced rapidly

increasing exports to China.

Market economy

MMicroeconomics

MMixed economy

NNormative analysis

PPositive analysis

PProductive efficiency

SScarcity

TTrade-off

VVoluntary exchange

1A - 1

Bar Graphs and Pie Charts

1A - 2

Time-Series Graphs

1A - 3

Plotting Price and QuantityPoints in a Graph

1A - 4

Calculating the Slope of a Line


Slopes of Lines

1A - 5


Taking Into Account More Than Two Variables on a Graph

Showing Three Variables on a Graph

1A - 6


Positive and Negative Relationships

Graphing the Direct Relationship between Income and

Consumption Spending

1A - 7


Slopes of Nonlinear Curves

The Slope of a Nonlinear Curve

Formulas

Formula for a Percentage Change

Using the growth of Gross Domestic Product (GDP) as

an example:

1A - 8

Formulas

Formulas for the Areas of a Rectangle and a Triangle

1A - 9

Formulas


The Area of a Right Triangle

Formulas

Summary of Using Formulas


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket



Taking Into Account More Than Two Variables on a Graph

1A - 5

Showing Three Variableson a Graph


Positive and Negative Relationships

1A - 6

Graphing the Direct Relationship between Income and

Consumption


Slopes of Nonlinear Curves

1A - 7

The Slope of a Nonlinear Curve

Formulas

Formula for a Percentage Change

Using the growth of Gross Domestic Product (GDP) as

an example:


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket

1A - 8

Formulas


1A - 9

Formulas


The Area of a Triangle

Formulas

Summary of Using Formulas


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket

Click to edit Master title style and for two-line headings


CHAPTER 1: Economics: Foundations and Models

Formulas


1A - 8

Formulas


1A - 9

The Area of a Triangle


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket

Scarcity The situation in which unlimited wants exce


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket


Decisions



Economies

Economic Models

The Halo Effect



EEconomic model

EEconomic variable

EEconomics

EEquity

MMacroeconomics

MMarginal analysis

MMarket

economics: foundations and models. what happens when u.s. firms move to china? after studying

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