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CHAPTER 1 The Scope and Method of Economics

Principles of Economics, 9e
; ;

By Karl E. Case, Ray C. Fair & Sharon M. Oster

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

CHAPTER 1 The Scope and Method of Economics

PART I INTRODUCTION TO ECONOMICS

The Scope and Method of Economics

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Prepared by: Fernando & Yvonn Quijano

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

PART I INTRODUCTION TO ECONOMICS

The Scope and Method of Economics
CHAPTER 1 The Scope and Method of Economics

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CHAPTER OUTLINE
Why Study Economics? To Learn a Way of Thinking To Understand Society To Understand Global Affairs To Be an Informed Voter The Scope of Economics Microeconomics and Macroeconomics The Diverse Fields of Economics The Method of Economics Theories and Models Economic Policy An Invitation Appendix: How to Read and Understand Graphs 4 of 34

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

The Scope And Method Of Economics

CHAPTER 1 The Scope and Method of Economics

economics The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

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.

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

5 of 34

Why Study Economics?

To Learn A Way Of Thinking

CHAPTER 1 The Scope and Method of Economics

Three fundamental concepts: Opportunity cost Marginalism, and Efficient markets

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

6 of 34

Why Study Economics?

To Learn A Way Of Thinking

CHAPTER 1 The Scope and Method of Economics

Opportunity Cost

opportunity cost The best alternative that we forgo, or give up, when we make a choice or a decision.

scarce Limited.

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

7 of 34

Why Study Economics?

To Learn A Way Of Thinking

CHAPTER 1 The Scope and Method of Economics

Marginalism and Sunk Costs marginalism The process of analyzing the additional or incremental costs or benefits arising from a choice or decision.

sunk costs Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred.

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

8 of 34

Why Study Economics?

To Learn A Way Of Thinking

CHAPTER 1 The Scope and Method of Economics

Efficient Markets—No Free Lunch

efficient market A market in which profit opportunities are eliminated almost instantaneously.

The study of economics teaches us a way of thinking and helps us make decisions.

© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster

9 of 34

Why Study Economics?

To Understand Society

CHAPTER 1 The Scope and Method of Economics

Industrial Revolution The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities....
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