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 segment Economics is tied in with settling on decisions. The issue is that needs or wants are essentiall y boundless while the assets accessible to fulfill these needs are scant. An asset is scant when it isn't openly accessible, when its cost surpasses zero. Financial aspects concentrates how individuals utilize their scant assets trying to fulfill their boundless wants.Use PowerPoint slides 4-9 for the accompanying areas Resources: The sources of info, or variables of creation, used to deliver the products and enterprises that people need. Assets are separated into four classes: 1. Work: Human exertion, both physical and mental 2. Capital: †¢ Physical capital: Manufactured things (apparatuses, structures) used to deliver merchandise and ventures. †¢ Human capital: Knowledge and abilities individuals get to build their work efficiency. 3. Normal assets: endowments of nature, waterways, trees, oil stores, minerals and creatures. These can be sustainable or modest. . Enterprising capacity: The creative mind required to build up another item or procedure, the aptitude expected to arrange creation, and the readiness to face the challenge of benefit or misfortune. Installments for assets: Laborâ€wage; capitalâ€interest; regular resourcesâ€rent; enterprising abilityâ€profit. Use PowerPoint slides 10-12 for the accompanying segment Goods and Services: Resources are consolidated to create merchandise and enterprises. †¢ 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. An assistance isn't unmistakable yet 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. Merchandise and ventures that are genuinely free are not the topic of financial matters. Without shortage, there would be no financial issue and no requirement at costs. Use PowerPoint slide 13 for the accompanying area Economic Decision Makers: There a re four sorts of leaders: 1. Families 2. Firms 3. Governments 4. The remainder of the worldTheir collaboration decides how an economy’s assets are assigned. Use PowerPoint slide 14 for the accompanying segment Markets: †¢ Buyers and venders do trades in business sectors. †¢ Goods and administrations are traded in item showcases. †¢ Labor, capital, regular assets, and innovative capacity are traded in asset markets. Use PowerPoint slides 15-16 for the accompanying segment A Simple Circular Flow Model: A straightforward round stream model in Exhibit 1 portrays the progression of assets, items, pay and income among monetary chiefs. The Art of Economic AnalysisUse PowerPoint slide 17 for the accompanying area Rational Self-Interest †¢ Economics accept that people, in settling on decisions, sanely select options they see to be to their greatest advantage. †¢ Rational alludes to individuals attempting to settle on the best decisions they can, given the acce ssible data. †¢ Each individual attempts to limit the normal expense of accomplishing a given advantage or to amplify the normal advantage accomplished with a given expense. Use PowerPoint slide 18 for the accompanying segment Choice Requires Time and Information: Time and data are scant and consequently valuable.Rational chiefs obtain data as long as the normal extra profit by the data is more prominent than its normal extra expense. Use PowerPoint slide 19 for the accompanying area Economic Analysis Is Marginal Analysis †¢ Economic decision depends on an examination of the normal negligible expense and the normal peripheral advantage of the activity viable. †¢ Marginal methods steady, extra, or extra. †¢ An objective chief changes business as usual if the normal peripheral advantage is more prominent than the normal minimal cost.Use PowerPoint slides 20-21 for the accompanying area Microeconomics and Macroeconomics †¢ Microeconomics: The investigation of i ndividual monetary decisions (e. g. , your monetary conduct). †¢ Macroeconomics: The investigation of the presentation of the economy all in all, as estimated, for instance, by complete creation and business. †¢ Economic variances: The ascent and fall of monetary 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 financial hypothesis is an improvement of monetary reality that is utilized to make forecasts about this present reality. A financial hypothesis catches the significant components of the issue under examination. Use PowerPoint slides 23-26 for the accompanying area The Scientific Method: A four-advance procedure of hypothetical examination: 1. Distinguish the question and characterize important factors. 2. Determine suppositions: †¢ Other-things-consistent presumption: Focuses on the connections bet ween the factors of enthusiasm, accepting that nothing else significant changes (I. e. , ceteris paribus). Conduct suppositions: Focus on how individuals will act (I. e. , in their balanced personal responsibility). 3. Define a speculation, a hypothesis about how key factors identify with one another. 4. Test the theory. Contrast its expectations 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 financial explanation concerns what is; it very well may be bolstered or dismissed by reference to realities. †¢ A standardizing financial articulation concerns what ought to be; it mirrors a feeling 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 area CaseStudy: A Yen for Vending Machines Use PowerPoint slide 29 for the accompanying segment Predicting Average Behavior: The assignment of a monetary hypothesis is to foresee the effect of a financial occasion on financial decisions and, thus, the impact of these decisions on specific markets or on the economy overall. Market analysts center around the normal, or run of the mill, conduct of individuals in gatherings. Use PowerPoint slides 30-31 for the accompanying segment Some Pitfalls of Faulty Economic Analysis The paradox 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 paradox of structure: The inaccurate conviction that what is valid for the individual, or the part, is valid for the gathering, or the entirety. †¢ The mix-up of disregarding optional impacts: (unintended outcomes of strategy) If Economist Are So Smart, Why Aren’t They Rich? Use PowerPoint slides 32-33 for the accompanying area CaseStudy: College Major and Annual Earnings Appendix: Und erstanding GraphsUse PowerPoint slides 34-39 for the accompanying segment Drawing Graphs †¢ Origin: The purpose of flight, the point from which all factors are estimated. †¢ Horizontal pivot: The estimation of the x variable increments as you move along this hub to one side of the inception; a straight line to one side of the starting point. †¢ Vertical pivot: The estimation of the y variable increments as you move upward and away from the beginning; a straight line stretching out over the cause. †¢ Within the space confined by the tomahawks, you can plot potential mixes of the factors estimated along every hub. †¢ Graph: An image indicating how factors relate. Time-arrangement diagram: 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 free factor decides the estimation of the needy variable). †¢ Types of connections between factors: †Positive, or direct, connection: As one variable builds, the other variable increments. †Negative, or reverse, connection: As one variable expands, the other variable declines. †Independent, or disconnected connection: As one variable builds, the other variable stays unaltered or unrelated.Use PowerPoint slides 40-46 for the accompanying segment The Slopes of Straight Lines †¢ The incline of a line gauges how much the vertical variable (y) changes for every 1-unit change in the even factor (x). †¢ The slant of a line is an advantageous gadget for estimating negligible 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 incline of a line is the adjustment in the vertical separation partitioned by the expansion in the level separation. The slant of a line relies upon how unit s are estimated; the scientific estimation of the incline relies upon the units of estimation in the diagram. †¢ The incline of a straight line is the equivalent wherever along the line. †¢ The incline of a bended line shifts starting with one point then onto the next along the bend. †¢ If the incline is: †Posi