Skip to content
Class Notes

Lecture Notes for Economics, 13th Edition

Lecture Notes for Economics, 13th Edition captures key lecture discussions, ensuring you don�t miss important concepts and insights.

Preview 16 of 366 pages

See the first 16 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    Preface iii Perspective My L ab Economics vii Flexibility How to Assemble Your Course i x  Part 1 Introduction Chapter 1 What is Economics? 1 Chapter 2 The Economic Problem 11  Part 2 How Markets Work Chapter 3 Demand and Supply 23 Chapter 4 Elasticity 37 Chapter 5 Efficiency and Equity 49 Chapter 6 Government Actions in Markets 61 Chapter 7 Global Markets in Action 7 5  Part 3 Households’ Choice Chapter 8 Utility and Demand 87 Chapter 9 Possibilities, Preferences, and Choices 99  Part 4 Firms and Markets Chapter 10 Organizing Production 109 Chapter 1 1 Output and Costs 119 Chapter 1 2 Perfect Competition 131 Chapter 1 3 Monopoly 143 Chapter 1 4 Monopolistic Competition 157 Chapter 1 5 Oligopoly 165  Part 5 Market Failure and Government Chapter 1 6 Public Choices , Public Goods , and Healthcare 175 Chapter 1 7 Externalities 185  Part 6 Factor Markets, Inequality, and Uncertainty Chapter 1 8 Markets for Factors of Production 19 5 Chapter 1 9 Economic Inequality 2 09 Chapter 20 Uncertainty and Information 21 9 T a b l e o f C o n t e n t s

  2. Page 2
  3. Page 3
    Read page 3 as text

    Introduction At no time in history has teaching the principles of economics been either more challenging or more important. Your decision to adopt the thirteenth edition of my textbook brings to your task a set of teaching and learning tools that are unmatched in their clarity, relevance, and currency. It is my hope that with the help of these tools, you will enable your students to become as excited about economics as you are. Whether you’re teaching the principles course for the first time or are an experienced teacher at this level, I hope you will find this manual helpful. Each chapter in the manual consists of five parts: 1. The Big Picture : This part provides a discussion of “Where we are going” and “Where we have been.” In other words it helps you fit this particular chapter into the context of what has come before and what will come later. This Big Picture information can help you provide the Big Picture to your students. 2. New in the T hirteenth Edition : Both the major and the minor changes in this thirteenth edition of the textbook are described in this section. The changes noted are especially those that might affect your lecture, so if you are an experienced Parkin user, glance at these to see what’s different in this edition of the textbook . 3. Lecture Notes: W e have created a set of ready - to - use lecture notes for each chapter. You will be able to glance over these notes before class, take them into class, and deliver from them your polished lecture. These notes have been heavily revised from the last edition to reflect all the latest changes. These notes provide:  Concise (bullet point) statements of all the key material  Tables and figures that differ from those in the book so that you can use new examples in your lectures  Key terms in bold print and the definitions from the textbook so that you can be sure that you don’t confuse your students by defining a term differently than the book  Highlighted boxes with teaching suggestions that reinforce a key concept, provide an additional anecdote, or suggest how to handle a difficult idea 4. Additional Problems : We present some additional problems that reflect the problems in the textbook. Some of these problems are carried over from the previous edition’s Solutions Manual ; others are new for this edition. Solutions for all the additional problems are provided. 5. Additional Discussion Questions : Additional discussion questions have been created for each chapter. Some of these questions are suitable for essay exams; others, more open - ended, are probably best used for classroom discussion. All of them are designed to make your students think and use the material you have been teaching them. Do not forget that the answers and solutions to all the Review Quizzes and the Problems at the end of each chapter are provided in a separate book, the Solutions Manual. The Solutions Manual has both the questions from the textbook and complete answers all in one handy source. You can use these answers P r e f a c e

  4. Page 4
    Read page 4 as text

    i v P R E F A C E and solutions to help you grade problems you have assigned to the students or else you can copy them and hand them out directly to the students. The Electronic Classroom The next Perspective features a special essay designed to assist your teaching in another way by discussing MyEconLab, an incredibly powerful Internet site that is a source of “one - stop shopping” for both your students and you. Th is essay can help you see all that is available to you — and your students! — on MyEconLab. Acknowledgments Teaching the principles of economics is a “work in progress.” As new insights are uncovered, as new knowledge emerges, the principles of economics course changes and evolves. So, too, are Parkin’s Microeconomics and Macroeconomics always changing and evolving to remain the best books available for you and your students’ use. Thus, it is with a great deal of pleasure that we acknowledge and thank several people who have helped us in shaping this edition of the I nstructor’s M anual. Mark Rush of the University of Florida edited (slightly!) the very fine work o f Laura Wolff of Southern Illinois University Edwardsville, who adapted previous work and wrote the new material for this, the thirteenth edition of this instructor’s manual for P arkin’s Microeconomics .. Even with all this help, there remains room for improvement in the text and (says Mark) in this manual. Any corrections, suggestions, or comments that you have will be greatly appreciated. Send your comments on this manual to Mark (Mark.Rush@cba.ufl.edu) and your comments on the text to me (michael.parkin@uwo.ca). Michael Parkin University of Western Ontario

  5. Page 5
    Read page 5 as text

    Introduction Instructors who have already used Michael Parkin’s Microeconomics are aware of its flexibility: There are many ways to teach from this book, depending on your preferences. Because there is no necessarily right or wrong way to teach a principles of microeconomics class, the microeconomic part of the book can be used in a variety of ways. The most obvious one is the order in which the chapters are printed. Other paths are illustrated in Table 1. Microeconomics Table 1 presents the flexibility in the microeconomic chapters. This is organized according to the three basic foundation chapters followed by a large selection of chapters you can next tackle. After finishing some or all of these chapters, more choices are presented. You can move quickly or slowly to the examining production and firms; quickly or slowly to efficiency and government policy in markets; quickly or slowly to consumer choice. The choice is up to you because you can shape the course you want to teach. HOW TO ASSEMBLE YOUR COURSE F l e x i b i l i t y

  6. Page 6
    Read page 6 as text

    x H O W T O A S S E M B L E Y O U R C O U R S E Table 1

  7. Page 7
    Read page 7 as text

    T h e B i g P i c t u r e Where we are going: After completing Chapter 1, the student will have a good sense for the range of questions that economics addresses and will be on the path towards an ec o nomic way of thinking . The student s will begin to think of cost as a forgone alternative — an opportunity cost — and also about making choices by balancing marginal costs and marginal benefits. Chapter 2 reinforces the central themes of Chapter 1 by laying out a core economic model, the production possibilities frontier ( PPF ) , and using it to illustrate the concepts of tradeoff and opportunity cost. Chapter 2 also provides a deeper explanation, again with a model, of the concepts of margin al cost and marginal benefit, beginning with the conc ept of efficiency, and concluding with a review of the source of the gains from specialization and e x change. N e w i n t h e T h i r t e e n t h E d i t i o n A significant change to this chapter that you probably want to spend some time on is a new section that presents data about the economics major and how well it ranks in the income spectrum of all majors. Most of the other content of this chapter remains the same short of updates to date sensitive items. There a minor reworking in the beginning of the math appendix that added clarity to the topics discussed. This important chapter is not one to gloss over as it lays down an important foundation that can be drawn from as you move through more specific applications later. Students relate well to the section on self and social interest which calls out issues of both efficiency and fairness and is great for class discussion . Economics in the News covers some current issues with Facebook and Mark Zuckerberg’s vision to have the I nternet available to the whole world. 1 WHAT IS ECONOMICS? C h a p t e r

  8. Page 8
    Read page 8 as text

    2 C H A P T E R 1 L e c t u r e N o t e s What Is Economics? I. Definition of Economics  Economic questions arise because we always want more than we can get, so we face scarcity , the inability to satisfy all our wants. Everyone faces scarcity because no one can satisfy all of his or her wants.  Scarcity forces us to make choices over the available alternative. The choices we make depend on incentives , a reward that encourages a choice or a penalty that discourages a choice. Forbes lists Bill Gates and Warren Buffet among some of the wealthiest Americans. Do these two men face scarcity? According to The Wall Street Journal , both men are ardent bridge players, yet they have never won one of the many national bridge tournaments they have entered as a team. These two men can easily afford the best bridge coaches in the world and but other duties keep them from practicing as much as they would need to in order to win. So even the wealthiest two Americans face scarcity (of time) and must choose how to spend their time. Economics  Economics is the social science that studies the choices that individuals, businesses, governments and entire societies make when they cope with scarcity and the incentives that influence and reconcile those choices.  Economists work to understand when the pursuit of self - interest advances the social interest  Economics is divided into microeconomics and macroeconomics :  Microeconomics is the study of the choices that individuals and businesses make, the way these choices interact in markets, and the influence of governments.  Macroeconomics is the study of the performance of the national economy and the global economy . On the first day do a “pop quiz . ” Have your students write on paper the answer to “What is Economics?” Reassure them that this is their opinion since it is the first day. You will find most of the answers focused around money and/or business. Stress that Economics is a social science, a study of human behavior given the scarcity problem. All too often first - time students (especially business students) think that Economics is just about making money. Certainly, the discipline can and does outline reasons why workers work longer hours to increase their wage earnings, or why firms seek profit as their incentive. But Economics also explains why a terminally ill cancer patient might opt for pain medication as opposed to continued chemotherapy/radiation, or why someone no longer in the workforce wants to go to college and attain a Bachelor’s degree, in their sheer pleasure of learning and understanding. Stressing the social part of our science now will help later when relating details to the overall bigger picture (especially when time later in the semester seems scarce, no pun intended!). The definition in the text: “ Economics is the social science that studies the choices that ind i viduals, businesses, governments, and societies make as they cope with scarcity and the incentives that influence and reconcile these choices,” is a modern language version of Lionel Robbins f a mous definition, “Economics is the science which studies human behavior as a relationship between ends and scarce means that have altern a tive uses.” Other definitions include those of Keynes and Marshall: John Maynard Keynes: “The theory of economics does not furnish a body of settled conclusions immed i ately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps it possessors to draw correct concl u sions.”

  9. Page 9
    Read page 9 as text

    W H A T I S E C O N O M I C S ? 3 Alfred Marshall: “Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the m a terial requisites of wellbeing.” A “shorthand” definition that resonates with students i s: “ Economics is the study of trying to satisfy unlimited wants with limited resources. ” Students can — and do — easily abbreviate this definition to “unlimited wants and limited resources,” which captures an essential economic insight. II. Two Big Economic Questions How do choices wind up determining what, how, and for whom goods and services are produced ? What, How and For Whom?  Goods and services are the objects that people value and produce to satisfy human wants. What we produce changes over time — today we produce more MP3s and CDs than 5 years ago.  Goods and services are produced using the productive resources called factors of production . These are land (the “gifts of nature” , natural resources ), labor (the work time and work effort people devote to production), capital (the tools, instruments, machines, buildings, and other constructions now used to produce goods and services), and entrepreneurship (the human resource that organizes labor, lan d, and capital).  The quality of l a bor depends on human capital , which is the knowledge and skill that people obtain from education, work experience, and on - the - job training.  Owners o f the factors of production earn income by selling the services of their factors. Land earns rent , labor earns wages , capital earns interest , and entrepreneurship earns profit . Do Choices Made in the Pursuit of Self - I nterest also p romote the s ocial i nterest?  You make a choice in your self - interest if you think that choice is the best one available for you.  An outcome is in the social interest if it is best for society as a whole.  A major question economists explore is “Could it be possible that when each of us makes choices in our self - interest, these choices are in the social interest?’ The Two Big Economic Questions Don’t skip the questions in a rush to get to the economic way of thinking. Open your st u dents’ eyes to economic in the world around them. Ask them to bring a newspaper to class and to identify headlines that deal with stories about What , How , and For Whom . Use Economics in the News Today on your Parkin Web site for a current news item and for an a r chive of past items (with questions). P ose questions but hold off on the answers letting them know that “we can have a much more fruitful discussion when our toolbox is ful l . ” Remind them that this course is about learning simple economic models that provide tools to seek answers to complex issues. Students (and others!) often take the answers to the what, how, and for whom questions for granted. For instance, most of the time we do not bother to wonder “How does our economy determine how many light bulbs, automobiles, and pizzas to produce?” ( what), or “Why does harvesting wheat from a plot of land in India occur with hundreds of laborers toiling with oxen pulling threshing machines, while in the United States, a single farmer listening to a Garth Brooks CD and sitting in an air - conditioned cab of a $500,000 machine harvests the same quantity of wheat from the same sized plot of land?” ( how ), or “Why is the annual income of an inspiring and effective grade school teacher much less than that of an average major - league baseball player?” ( for whom ). Explaining the answers to these types of questions and determining whether the answers are in the social interest is a major part of microeconomics. Figure 1.1 in the textbook “What Three Countries Produce” ties in nicely with Chapter 2’s later discussion on the PPF . Figure 1.1 also links the three questions of what, how and for whom nicely to the component

  10. Page 10
    Read page 10 as text

    4 C H A P T E R 1 parts of those questions: goods and services, factors of production (land, labor, capital, entrepreneurship), and incomes economic agents earn (rent, wages, interest and profit).  We can examine whether the self - interested choices serve the social interest for a variety topics:  Globalization : Buying an iPod allows workers overseas to earn a wage and provide for family  I nformation - A ge Monopolies : A f irm producing popular software leads to format standards  Climate Change : Carbon dioxide emissions led to higher global temperatures and climate change  Financial I nstability : Bank bailouts with the intent of social interest may cause more risky loans to be made in the future by banks serving their own self - interests. III. Economic Way of Thinking Scarcity requires choices and choices create tradeoffs. What is the d ifference between s carcity and poverty? Ask the students why they haven’t yet attained all of their personal goals. One reason will be that they lack sufficient money. Ask them if they could attain all of their goals if they were as rich as Bill Gates. They quickly r e alize that time is a big constraint — and the great leveler: we all have only 24 hours in a day. They have stumbled on the fact that scarcity, which even Bill Gates faces, is not po v erty. A Choice is a Tradeoff  A tradeoff is an exchange — giving up one thing to get another.  Whatever choice you make, you could have chosen something else. Virtually every choice that can be thought of involves a tradeoff. Presenting a few of the following as examples can help your class better appreciate this key point:  Consumption and savings: If someone decides to save more of his or her income, savings can be funneled through the financial system to finance businesses new capital purchases. As a society, we trade off current consumption for economic growth and higher future consumption.  Education and training: A student remaining in school for another two years to complete a degree will need to forgo a significant amount of leisure time. But by doing so, he or she will be better educated and will be more productive. As a society, we trade off current production for greater future production.  Research and development: Factory automation brings greater productivity in the future, but means smaller current production. As a society, we trade off current production for greater future production. Making a Rational Choice  A rational choice is one that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.  But how do people choose rationally? Why do more people choose an iP hone rather than a Windows phone ? Why has the U.S. government chosen to build an interstate highway system and not an interstate high - speed railroad system? The answers turn on comparing benefits and costs. Benefit: What you Gain  The benefit of something is the gain or pleasure that it brings and is determined by preferences — by what a person likes and dislikes and the intensity of those feelings.  Some benefits are large and easy to identify, such as the benefit that you get from being in school. Much of that benefit is the additional goods and services that you will be able to enjoy with the boost to your earning power when you graduate.

  11. Page 11
    Read page 11 as text

    W H A T I S E C O N O M I C S ? 5  Some benefits are small, such as the benefit you get from a slice of pizza. That benefit is just the pleasure and nutrition that you get from your pizza. Cost: What You Must Give Up Seeing choices as tradeoffs shows there is an opportunity cost of a choice. The opportunity cost of something is the highest - valued alternative that must be give n up to get it . So, for instance, the opportunity cost of being in school is all the good things that you can’t afford and don’t have the spare time to enjoy. Students like the “ Dr. Suess Version ” : Opportunity cost is the thing you would have done if you did not do what you did. What is the Opportunity Cost of Getting a College Degree? When the students calculate their opportunity cost of being in school, be sure they place a value on their leisure time lost to studying on weekends and evenings. Most students are shaken when they realize that when lost leisure time and income is included in their calculations, the opportunity cost of a co l lege degree approaches $200,000 or more. Don’t leave them hanging here though. Mention that a college education does yield a high rate of financial return over. T o ensure that people do not die of any serious side effects, the Food and Drug Administration (FDA) requires all drug companies to thoroughly test newly developed medicines before allowing them to be sold in the United States. However, it takes many years to perform these tests and many people suffering from the terminal diseases these new medicines are designed to cure will die before good new medicines are eventually approved for use. Yet, if the FDA were to abandon this testing process, many others would die from the serious side effects of those bad medicines that made it to market. People’s lives will be at risk under either policy alternative. This stark example of a tradeoff reveals the idea that choices have opportunity costs. How Much? Choosing at the Margin  Making choices at the margin means looking at the trade - offs that arise from making small changes in an activity. People make choices at the margin by comparing the benefit from a small change in an activity (which is the marginal benefit ) to the cost of making a small change in an activity (which is the marginal cost ) .  Changes in marginal benefits and marginal costs alter the incentives that we face when making choices. When incentives change, people’s decisions change.  For example, if homework assignments are weighed more heavily in a class’s final grade, the marginal benefit of completing homework assignments has increased and more students will do the homework. Choices Respond to Incentives  Economists take human nature as given and view people acting in their self - interest.  Self - interest actions are not necessarily selfish actions . Self interest can be said to be in the eye of the beholder. Thus, covering the next portion on positive v ersus normative analysis can be crucial to the student’s understanding how economic agents act in their own self - interests, but perhaps not (and often not) in other’s self - interest.

  12. Page 12
    Read page 12 as text

    6 C H A P T E R 1 IV. Economics as Social Science and Policy Tool Economist as Social Scientist  Economists distinguish between positive statements and normative statements . A positive statement is about “ what is ” and is testable. A normative statement is about “ what ought to be ” and is an opinion and so is inherently not testable. A positive statement is “Raising the tax on a gallon of gasoline will raise the price of gasoline and lead more people to buy smaller cars” while a normative statement is “The tax on a gallon of gasoline should be raised.”  Economists tend to agree on positive statements, though they might disagree on normative statements.  An economic model describes some aspect of the economic world that includes only those features needed for the purpose at hand. Economic models describe the economic world in the same way that a road map explains the road system: Both focus on only what is important and both are abstract depictions of the real world.  Testing an economic model can be difficult, given we observe the outcomes of the simultaneous operation of many factors. So, economists use the following to copy with the problem:  Natural experiment: A situation that arises in the ordinary course of economic life in which the one factor of interest is different and other things are equal or similar.  Statistical Investigation: A statistical investigation might look for the correlation of two variables, to see if there is some tendency for the two variables to move in a predictable and related way ( e.g. cigarette smoking and lung cancer).  Economic Experiment: Putting people in a decision - making situation and varying the influence of one factor at a time to see how they respond. Eco nomic Model vs . the General Lee Car M odel When I was a kid, I had a plastic model car that I put together that was from Dukes of Hazard television show (you can insert your own “model” as you’d like). Tell the students, “Even though we all know the model car is not a “real” car, it does give us insights into what the real car is like. You have number on the door, the confederate flag on top, the proportions are correct and if you lift the little hood you can see what a V8 engine looks like”. An economic model is similar in that it gives us a glimpse of reality under some certain assumptions and although it is not reality it gives us insights about reality . Economist as Policy Adviser  Economics is useful. It is a toolkit for advising governments and businesses and for making personal decisions.  For a given goal, economics provides a method of evaluating alternative solutions — comparing marginal benefits and marginal costs and finding the solution that makes the best use of the available resources. The success of a model is judged by its ability to predict. Help your student’s appreciate that no matter how appealing or “realistic looking” a model appears to be, it is useless if it fails to predict. And the co n verse, no matter how abstract or far removed from reality a model a p pears to be, if it predicts well, it is valuable. Milton Friedman’s Pool Hall example illustrates the point nicely. Imagine a phys i cist’s model that predicts where a carefully placed shot of a pool shark would go as he tries to sink the eight ball into the corner pocket. The model would be a complex, trigonometric equ a tion involving a plethora of Greek symbols that no ordinary person would even recognize as representing a pool shot. It certainly wouldn’t depict what we actually see — a pool stick striking a pool cue on a rectangular patch of green felt. It wouldn’t even reflect the thought processes of the pool shark that relies on years of experience and the right “touch.” Yet, co n structed correctly, this mathematical model would predict exactly where the cue ball

  13. Page 13
    Read page 13 as text

    W H A T I S E C O N O M I C S ? 7 would strike the eight ball, hit opposite the bank, and fall into the corner pocket. (You can easily invent analogous examples from any sport.) V. Economists in the Economy Jobs for an Economics Major  Economists work for private firms, governments, and international organizations. Some have a bachelor’s degree, while others have a master’s degree or a PhD.  On their jobs, e conomists often collect and analyze data on production and use of resources, goods, and services in order to predict future trends or devise ways to use resources more efficiently.  Economists have jobs as market research analysts, financial analysts, and, less often, budget analysts. There were about 850,000 of these jobs in the United States in 2014. Will Jobs for Economics Major s Grow?  The Bureau of Labor Statistics (BLS) has forecast that from 2014 to 2024, jobs for PhD economists will grow 6 percent; jobs for budget analysts will grow by only 2 percent; but jobs for financial analysts will grow by 12 percent; and jobs for market research analysts will grow by 19 percent.

  14. Page 14
    Read page 14 as text

    8 C H A P T E R 1 A d d i t i o n a l P r o b l e m s 1. You plan a major adventure trip for the summer. You won’t be able to take your usual summer job that pays $6,000, and you won’t be able to live at home for free. The cost of your travel accomodations on the trip will be $3,000, gasoline will cost you $200, and your food will cost $1,400. What is the opportunity cost of taking this trip? 2. The university has built a new parking garage. There is a l ways an available parking spot, but it costs $1 per day. B e fore the new garage was built, it usually took 15 minutes of cruising to find a parking space. Compare the opportunity cost of parking in the new garage with that in the old par k ing lot. Which is less costly and by how much? S o l u t i o n s t o A d d i t i o n a l P r o b l e m s 1. The opportunity cost of taking this trip is $10,600. The opportunity cost of taking the trip is the highest - valued activity that you will give up so that you can go on the trip. In taking the trip, you will forgo all the goods and services that you could have bought with the income from your summer job ($6,000) plus the expenditure on travel accommodations ($3,000), gasoline ($200), and food ($1,400). 2. The opportunity cost of parking before the building of the new parking garage is the hig h est - valued a c tivity that you forgo by spending 15 minutes parking your car. The opport u nity cost of parking in the new parking garage is $1 that you could have spent elsewhere. If the opportunity cost of 15 minutes spent parking your car is greater than the opportunity cost of $1, then the new parking garage is less costly. A d d i t i o n a l D i s c u s s i o n Q u e s t i o n s 1 . Why are economists so concerned about the material aspects of life? Explain that this is a myth! Economists are often criticized for focusing on material well - being because of the general public’s view that economics is about money . Explain that there are economists that research social and em o tional (or spiritual) aspect s of life . You may also add that these parts of life often depend heavily on attaining material well - being. You may want to reference the Economic Freedom Index (www.freetheworld.com) and its explanatory power on issues of world hunger and poverty. Ask them to consider the need for life - enhancing goods and services such as health care or education to support spiritual or emotional well - being. Ask how protestors would be able to voice their opinions without low - cost air travel and the power of the Internet to coordinate the a c tivities of hundreds of protesters. (Be careful not to seem to be either condoning or condemning these activities.) Most students will begin to see that the more efficient we are at producing m a terial prosperity, the more time and opportunity everyone has to promote emotional (or spir i tual) goals. 2 . Mini Case Study Illustrating How Economists Use Modeling : Women are unfairly underpaid when compared to men . Ask your students whether this statement is positive or normative . Mention that the media frequently reports that the ave r age woman gets paid only 3 / 4 the wages of the average man. Is this “fact” a sufficient test of the positive stat e ment? If women were paid more than men in one or two professions (like professional modeling or elementary teaching) is that sufficient evidence to conclude that women in

  15. Page 15
    Read page 15 as text

    W H A T I S E C O N O M I C S ? 9 general are not underpaid when co m pared to men? Ask the students to think about how to properly test the model . Are these counter examples enough to discard the idea that women are underpaid? What would you take into account when you collected data to compare women’s salaries versus men’s salaries? Remind the students that any model directly compa r ing men’s and women’s wages should control for any differences in wage - relevant characteristics between working men and women. You can discuss many different reasons why a ge n der wage gap can occur, including:  Women are underrepresented in higher paid occupations and are overrepresented in lower paid o c cupations (the problem may not be un e qual pay but instead it may be unequal access to high pa y ing jobs (glass ceiling ?);  Women are underrepresented among those earning advanced degrees, though mostly among older age cohorts (U.S. Bureau of Labor Statistics, Employment and Ear n ings , Vol. 45, January, 1998). Here the problem here might not be un e qual pay but unequal access to higher education;  Women have relatively less occupational - specific work e x perience and have relatively less unbroken work experience, as many women struggle between pursuing a career and rai s ing a family. For example, one study found that women who were not mothers earned 90 percent of men’s salaries, whereas those who were mothers earned only 77 percent (Waldfogel, “Understanding the ‘Family Gap’ in Pay for Women with Children,” Journal of Economic Perspe c tives , Vol. 12, No. 1, 1998). Does it further the public interest (and the interests of women workers specifically) to propagate no r mative statements about wage inequality based on statistics without taking account of all relevant factors? Summarize the discussion by noting that economic studies have indeed found evidence that a gender gap in wages exists in the United States, even after co n trolling for all known relevant factors. However, the gender wage gap is much less than the 1/3 number often quoted by the media, and has been decreasing significantly over the last few decades (Blau, “Trends in the Well Being of American Women, 1970 - 1995,” Journal of Economic Literature, Vol. 36, No.1, March 1998). Get the students to see how pro p erly a p plying the science of economics to social issues helps us strip away inflammatory rhetoric and e x amine the problem car e fully and objectively.

  16. Page 16
    Read page 16 as text

    1 0 C H A P T E R 1 C h a p t e r 1 A p p e n d i x , G r a p h s i n E c o n o m i c s L e c t u r e N o t e s Goggle Theory Explain to students that you are going to ask them to use three sets of goggles to view math in the course. I have found this to be a great tool for students to understand why we present data in different ways. 1. Equation Goggles : Write an equation in slope - intercept form and explain that this is one way to show relationships between two variables. I like to use X and Y for this one and then quickly explain that economics is much more fun than math because we may be talking about X - rays and Yo - Yo’s. This helps some students break the barrier early on what “variable” means. 2. Graphing Goggles : Work through a graph of the equation you wrote highlighting slope and intercept. Indicate that this may be a Demand or Supply curve for instance. 3. Now you can explain that they will see all three of these forms of math at different times during the course and it is important for them to understand that you can move between all three anytime. We usually have it shown just one way for convenience. It is also fun during lecture to say, “I need you to pull out your graphing goggles.” I. Graphing Data  Graphs are valuable tools that clarify what otherwise might be obscure relationships.  Graphs represent “quantity” as a distance . Two - variable graphs use two perpendicular scale lines. The vertical line is the y - axis. The horizontal line is the x - axis. The zero point in common to both axes is the origin.  Scatter diagram — a graph that plots the value of one variable on the x - axis and the value of the associated variable on the y - axis. A scatter diagram can make clear the relationship b e tween two variables. II. Graphs Used in Economic Models  Graphs are used to show the relationship between var i ables. Graphs can immediately convey the relationship between the var i ables:  A positive relationship (or direct relationship ) — when the variable on the x - axis i n creases the variable on the y - axis increases. A straight line is a linear relationship .  A negative relationship (or inverse relationship ) — when the variable on the x - axis increases, the variable on the y - axis decreases.  A maximum or a minimum — when the variable has a highest or lowest value. III. The Slope of a Relationship  The slope of a curve equals the change in the value of the variable on the vertical axis at the point where the slope is being calculated divided by the change in the value of the variable on the horizo n tal axis at the relevant point.  In terms of symbols, the slope equals  y /  x , with  standing for “ change in. ”  The slope of a straight line is constant. The slope is positive if the variables are positively related and neg a tive if the variables are negatively related.  The slope of a curved line at a point equals the slope of the straight line that is tangent to the curved line at the point.  The slope of a curved line across an arc equals the slope of a straight line between the two points on the curved line.

350 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.

Unlock the full document

More Economics study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.