Macroeconomics, 2nd Edition Solution Manual

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Chapter 01 - Economics and Life1-1CHAPTER 1ECONOMICS AND LIFEChapter OverviewEconomists approach problems differently from many other people. A basic principle of humanbehavior underlies economics—the idea that people typically make choices to achieve theirgoals in the most effective way possible, subject to the constraints they face.In this chapter we have introduced the basic concepts economists use, as well as four questionsthey ask to break down problems. Throughout this book, you will see these concepts andquestions over and over again:1.Scarcity:What are the wants and constraints of those involved?2.Opportunity cost:What are the trade-offs?3.Incentives:How will others respond?4.Efficiency:Why isn’t someone already doing it?In later chapters, as we progress to more complicated problems, try using these four questionsto break down problems into manageable pieces. Then you can tackle those smaller piecesusing the four fundamental concepts presented in this chapter.Learning ObjectivesLO 1.1: Explain the economic concept of scarcity.LO 1.2: Explain the economic concepts of opportunity cost and marginal decision making.LO 1.3: Explain the economic concept of incentives.LO 1.4: Explain the economic concept of efficiency.LO 1.5: Distinguish between correlation and causation.LO 1.6: List the characteristics of a good economic model.LO 1.7: Distinguish between positive and normative analysis.Chapter OutlineOPENING STORY: MAKING AN IMPACT WITH SMALL LOANSThe Basic Insights of EconomicsScarcity(LO 1.1)Opportunity Cost and Marginal Decision Making(LO 1.2)BOX FEATURE: WHAT DO YOU THINK? – THE OPPORTUNITY COST OF A LIFEIncentives(LO 1.3)Efficiency(LO 1.4)An Economist’s Problem-Solving ToolboxCorrelation and Causation(LO 1.5)

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Economics

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Macroeconomics by Dean S. Karlan, J...

Macroeconomics, 2nd Edition Solution Manual

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