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© 2009 Pearson Education, Inc. Publishing as Prentice Hall Principles of Economics 9e by Case, Fair and Oster
PART I INTRODUCTION TO ECONOMICS
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
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The Scope And Method Of Economics
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Why Study Economics?
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Why Study Economics?
Opportunity Cost
scarce Limited.
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Why Study Economics?
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Why Study Economics?
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Why Study Economics?
To Understand Society
CHAPTER 1 The Scope and Method of Economics
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Why Study Economics?
ECONOMICS IN PRACTICE
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Why Study Economics?
To Be An Informed Citizen
CHAPTER 1 The Scope and Method of Economics
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The Scope of Economics
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The Scope of Economics
Divisions
of Economics Production Prices Income Employment
Microeconomics Production/output in Price of individual Distribution of Employment by
individual industries and goods and services income and individual businesses
businesses wealth and industries
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 Scope of Economics
The Diverse Fields of Economics
TABLE 1.2 The Fields of Economics
Comparative economic examines the ways alternative economic systems function. What are the
systems advantages and disadvantages of different systems?
Econometrics applies statistical techniques and data to economic problems in an effort to test
hypotheses and theories. Most schools require economics majors to take at least
CHAPTER 1 The Scope and Method of Economics
Industrial organization looks carefully at the structure and performance of industries and firms within an
economy. How do businesses compete? Who gains and who loses?
International economics studies trade flows among countries and international financial institutions. What are
the advantages and disadvantages for a country that allows its citizens to buy and
sell freely in world markets? Why is the dollar strong or weak?
Labor economics deals with the factors that determine wage rates, employment, and unemployment.
How do people decide whether to work, how much to work, and at what kind of job?
How have the roles of unions and management changed in recent years?
Law and economics analyzes the economic function of legal rules and institutions. How does the law
change the behavior of individuals and businesses? Do different liability rules make
accidents and injuries more or less likely? What are the economic costs of crime?
Public economics examines the role of government in the economy. What are the economic functions
of government, and what should they be? How should the government finance the
services that it provides? What kinds of government programs should confront the
problems of poverty, unemployment, and pollution? What problems does
government involvement create?
Urban and regional studies the spatial arrangement of economic activity. Why do we have cities? Why
economics are manufacturing firms locating farther and farther from the center of urban areas?
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The Method of Economics
CHAPTER 1 The Scope and 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
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The Method of Economics
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The Method of Economics
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The Method of Economics
Economic Policy
CHAPTER 1 The Scope and Method of Economics
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The Method of Economics
Economic Policy
CHAPTER 1 The Scope and Method of Economics
Efficiency
Equity
equity Fairness.
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The Method of Economics
Economic Policy
CHAPTER 1 The Scope and Method of Economics
Growth
Stability
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An Invitation
CHAPTER 1 The Scope and Method of Economics
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REVIEW TERMS AND CONCEPTS
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APPENDIX
HOW TO READ AND UNDERSTAND GRAPHS
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APPENDIX
HOW TO READ
AND UNDERSTAND GRAPHS
TIME SERIES GRAPHS
Total Total
Disposable Disposable
Personal Personal
Year Income Year Income
1975 1,181.4 1991 4,474.8
1976 1,299.9 1992 4,754.6
1977 1,436.0 1993 4,935.3
1978 1,614.8 1994 5,165.4
1979 1,808.2 1995 5,422.6
1980 2,019.8 1996 5,677.7
1981 2,247.9 1997 5,968.2
1982 2,406.8 1998 6,355.6
1983 2,586.0 1999 6,627.4
1984 2,887.6 2000 7,120.2
1985 3,086.5 2001 7,393.2
1986 3,262.5 2002 7,827.7
1987 3,459.5 2003 8,159.9
1988 3,752.4 2004 8,646.9
1989 4,016.3 2005 8,945.6 FIGURE 1A.1 Total Disposable Personal
1990 4,293.6 2006 9,501.5 Income in the United States: 1975–2006 (in
billions of dollars)
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APPENDIX
Appendix
HOW TO READ AND UNDERSTAND GRAPHS
System
A Cartesian coordinate system is
constructed by drawing two
perpendicular lines: a vertical
axis (the Y-axis) and a horizontal
axis (the X-axis). Each axis is a
measuring scale.
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APPENDIX
HOW TO READ AND UNDERSTAND GRAPHS
PLOTTING INCOME AND CONSUMPTION DATA
FOR HOUSEHOLDS
TABLE 1A.2 Consumption Expenditures
and Income, 2005
Average
Consumption
CHAPTER 1 The Scope and Method of Economics
Average Income
Before Taxes Expenditures
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APPENDIX
HOW TO READ AND UNDERSTAND GRAPHS
SLOPE
Y Y2 Y1
X X 2 X 1
FIGURE 1A.4 A Curve with (a) Positive Slope and (b) Negative Slope
CHAPTER 1 The Scope and Method of Economics
A positive slope indicates that increases in X are A negative slope indicates the opposite—
associated with increases in Y and that decreases when X increases, Y decreases and when
in X are associated with decreases in Y. X decreases, Y increases.
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APPENDIX
HOW TO READ AND UNDERSTAND GRAPHS
CHAPTER 1 The Scope and Method of Economics
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APPENDIX
SOME PRECAUTIONS
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REVIEW TERMS AND CONCEPTS
CHAPTER 1 The Scope and Method of Economics
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