Microeconomics/Macroeconomics Chapter 1 Questions and Answers

Section 1 The Art and Science of Economic Analysis INTRODUCTION THIS CHAPTER HAS TWO PURPOSES: TO INTRODUCE STUDENTS TO SOME OF THE BASIC LANGUAGE OF ECONOMICS AND TO STIMULATE STUDENT INTEREST IN THE SUBJECT. IT CONVEYS TO STUDENTS THAT ECONOMICS IS NOT ONLY FOUND IN THE FINANCIAL SECTION OF THE NEWSPAPER, BUT ALSO IS VERY MUCH A PART OF THEIR EVERYDAY LIVES. Starting WITH THE ECONOMIC PROBLEM OF SCARCE RESOURCES BUT UNLIMITED WANTS, THIS CHAPTER PROVIDES AN OVERVIEW OF THE FIELD AND THE ANALYTICAL TECHNIQUES USED. Ideas INTRODUCED INCLUDE: RESOURCES, GOODS AND SERVICES, THE ECONOMIC ACTORS IN THE ECONOMY, AND MARGINAL ANALYSIS.TWO MODELS FOR ANALYSIS, THE CIRCULAR FLOW MODEL AND STEPS OF THE SCIENTIFIC METHOD, ARE INTRODUCED. THE APPENDIX INTRODUCES THE USE OF GRAPHS. Part OUTLINE THE ECONOMIC PROBLEM: SCARCE RESOURCES, UNLIMITED WANTS Use PowerPoint slide 3 for the accompanying area Economics is tied in with settling on decisions. The issue is that needs or wants are for all inten ts and purposes boundless while the assets accessible to fulfill these needs are scant. An asset is scant when it isn't unreservedly accessible, when its cost surpasses zero. Financial matters concentrates how individuals utilize their scant assets trying to fulfill their boundless wants.Use PowerPoint slides 4-9 for the accompanying segments Resources: The sources of info, or components of creation, used to deliver the merchandise and enterprises that people need. Assets are partitioned into four classes: 1. Work: Human exertion, both physical and mental 2. Capital: †¢ Physical capital: Manufactured things (devices, structures) used to deliver products and ventures. †¢ Human capital: Knowledge and aptitudes individuals gain to build their work profitability. 3. Characteristic assets: blessings of nature, waterways, trees, oil stores, minerals and creatures. These can be inexhaustible or modest. . Enterprising capacity: The creative mind required to build up another item o r procedure, the ability expected to sort out creation, and the readiness to face the challenge of benefit or misfortune. Installments for assets: Laborâ€wage; capitalâ€interest; normal resourcesâ€rent; enterprising abilityâ€profit. Use PowerPoint slides 10-12 for the accompanying area Goods and Services: Resources are consolidated to deliver merchandise and ventures. †¢ A decent is something we can see, feel, and contact (I. e. , corn). It requires scant assets to create and is utilized to fulfill human needs. A help isn't substantial however requires scant assets to create and fulfills human needs (I. e. , hair style). †¢ A decent or administration is scant if the sum individuals request surpasses the sum accessible at a cost of zero. Products and ventures that are really free are not the topic of financial matters. Without shortage, there would be no monetary issue and no requirement at costs. Use PowerPoint slide 13 for the accompanying area Economic Decisi on Makers: There are four sorts of leaders: 1. Family units 2. Firms 3. Governments 4. The remainder of the worldTheir cooperation decides how an economy’s assets are distributed. Use PowerPoint slide 14 for the accompanying segment Markets: †¢ Buyers and dealers complete trades in business sectors. †¢ Goods and administrations are traded in item showcases. †¢ Labor, capital, regular assets, and enterprising capacity are traded in asset markets. Use PowerPoint slides 15-16 for the accompanying segment A Simple Circular Flow Model: A basic round stream model in Exhibit 1 depicts the progression of assets, items, pay and income among financial chiefs. The Art of Economic AnalysisUse PowerPoint slide 17 for the accompanying segment Rational Self-Interest †¢ Economics expect that people, in settling on decisions, reasonably select choices they see to be to their greatest advantage. †¢ Rational alludes to individuals attempting to settle on the best decisi ons they can, given the accessible data. †¢ Each individual attempts to limit the normal expense of accomplishing a given advantage or to augment the normal advantage accomplished with a given expense. Use PowerPoint slide 18 for the accompanying area Choice Requires Time and Information: Time and data are scant and in this way valuable.Rational chiefs procure data as long as the normal extra profit by the data is more noteworthy than its normal extra expense. Use PowerPoint slide 19 for the accompanying segment Economic Analysis Is Marginal Analysis †¢ Economic decision depends on an examination of the normal minimal expense and the normal negligible advantage of the activity viable. †¢ Marginal methods steady, extra, or extra. †¢ A sane chief changes the state of affairs if the normal minor advantage is more noteworthy than the normal peripheral cost.Use PowerPoint slides 20-21 for the accompanying area Microeconomics and Macroeconomics †¢ Microeconomics: The investigation of individual financial decisions (e. g. , your monetary conduct). †¢ Macroeconomics: The investigation of the presentation of the economy all in all, as estimated, for instance, by absolute creation and work. †¢ Economic changes: The ascent and fall of financial action comparative with the drawn out development pattern of the economy; likewise called business cycles. Use PowerPoint slide 22 for the accompanying segment The Science of Economic AnalysisThe Role of Theory: A monetary hypothesis is a rearrangements of financial reality that is utilized to make expectations about this present reality. A monetary hypothesis catches the significant components of the issue under examination. Use PowerPoint slides 23-26 for the accompanying segment The Scientific Method: A four-advance procedure of hypothetical examination: 1. Distinguish the question and characterize applicable factors. 2. Determine suppositions: †¢ Other-things-consistent suspicion: Focuse s on the connections between the factors of enthusiasm, expecting that nothing else significant changes (I. e. , ceteris paribus). Conduct suppositions: Focus on how individuals will act (I. e. , in their levelheaded personal responsibility). 3. Figure a speculation, a hypothesis about how key factors identify with one another. 4. Test the speculation. Contrast its forecasts and proof. The hypothesis is then either dismissed, acknowledged, or changed and retested. Use PowerPoint slide 27 for the accompanying area Normative versus Positive †¢ A positive monetary explanation concerns what is; it very well may be upheld or dismissed by reference to realities. †¢ A regularizing monetary proclamation concerns what ought to be; it mirrors a supposition and can't be demonstrated to be valid or bogus by reference to the facts.Economists Tell Stories Use PowerPoint slide 28 for the accompanying segment CaseStudy: A Yen for Vending Machines Use PowerPoint slide 29 for the accompanyi ng area Predicting Average Behavior: The assignment of a financial hypothesis is to foresee the effect of a monetary occasion on monetary decisions and, thus, the impact of these decisions on specific markets or on the economy all in all. Financial experts center around the normal, or common, conduct of individuals in gatherings. Use PowerPoint slides 30-31 for the accompanying segment Some Pitfalls of Faulty Economic Analysis The false notion that affiliation is causation: The way that one occasion goes before another or that two occasions happen at the same time doesn't imply that one caused the other. †¢ The error of organization: The erroneous conviction that what is valid for the individual, or the part, is valid for the gathering, or the entirety. †¢ The error of overlooking optional impacts: (unintended outcomes of arrangement) If Economist Are So Smart, Why Aren’t They Rich? Use PowerPoint slides 32-33 for the accompanying segment CaseStudy: College Major an d Annual Earnings Appendix: Understanding GraphsUse PowerPoint slides 34-39 for the accompanying area Drawing Graphs †¢ Origin: The purpose of takeoff, the point from which all factors are estimated. †¢ Horizontal hub: The estimation of the x variable increments as you move along this pivot to one side of the cause; a straight line to one side of the source. †¢ Vertical pivot: The estimation of the y variable increments as you move upward and away from the source; a straight line stretching out over the starting point. †¢ Within the space surrounded by the tomahawks, you can plot potential blends of the factors estimated along every pivot. †¢ Graph: An image demonstrating how factors relate. Time-arrangement chart: Shows the estimation of at least one factors after some time. †¢ Functional connection: Exists between two factors when the estimation of one variable relies upon the other variable (e. g. , the estimation of the autonomous variable decides t he estimation of the reliant variable). †¢ Types of connections between factors: †Positive, or direct, connection: As one variable expands, the other variable increments. †Negative, or opposite, connection: As one variable builds, the other variable reductions. †Independent, or inconsequential connection: As one variable expands, the other variable stays unaltered or unrelated.Use PowerPoint slides 40-46 for the accompanying area The Slopes of Straight Lines †¢ The slant of a line quantifies how much the vertical variable (y) changes for every 1-unit change in the level variable (x). †¢ The slant of a line is a helpful gadget for estimating peripheral impacts. Slant mirrors the adjustment in y for every one unit change in x. †¢ The slant of a line doesn't suggest causality yet demonstrates a connection between the factors. †¢ The slant of a line is the adjustment in the vertical separation partitioned by the expansion in the flat separation. T he slant of a line relies upon how units are estimated; the scientific estimation of the incline relies upon the units of estimation in the chart. †¢ The slant of a straight line is the equivalent wherever along the line. †¢ The slant of a bended line fluctuates starting with one point then onto the next along the bend. †¢ If the incline is: †Posi