The Nature and Method of Economics

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Chapter One
The Nature and Method of Economics


This chapter begins with a discussion of the meaning and importance of economics. In this first chapter, however, we will not plunge into problems and issues; instead we consider some important preliminaries. We first look at the economic perspective—how economists think about problems. Next, we state some of the benefits of studying economics. Then, we examine the specific methods economists use to examine economic behavior and the economy, distinguishing between macroeconomics and microeconomics. Finally, the problems, limitations, and pitfalls that hinder sound economic reasoning are examined.

The Appendix to Chapter 1 provides an important introduction to graphical analysis. While this will be review material for most students, for some this may be new. Instructors are strongly urged to confirm that their students understand this section before proceeding. The software supplement can provide effective remedial help for those students who are not familiar with graphical analysis.


The discussion of “rational behavior” has been expanded and now includes introduction of the term “utility” (introduced in chapter two of the 15th edition). “Utility” appears in bold and is included in the end-of-chapter “terms and concepts” list The Origin of the Idea web-button on “utility” (2.1 from the previous edition) has been moved to the web material for this chapter and renumbered to 1.2.

“Consider This” boxes have been added to the text. These provide students with analogies, anecdotes, and insights to facilitate connection with the material. This material was introduced in the previous edition as web-button “Analogies, Anecdotes, and Insights” (AAI). Other AAI pieces have been renamed in this edition as “Concept Illustrations” and appear only in the instructors’ manual as suggestions for approaching certain material and helping students overcome common stumbling blocks....
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