Fundamentals

Chapter 1

Main topics
Introduction main themes
Three problems of economic organization
Societys technological limits
Production possibility
Opportunity cost

Main themes of economics

Main themes
Scarcity limited resources; limitless wants
Efficiency making the best use of what we
have

Economics: how societies use scarce resources to

produce valuable commodities & distribute the to
different people.

Microeconomics & macroeconomics

Logic in economics: post-hoc, ergo propter hoc;

fallacy of composition (e.g. saving & AD)

Main themes of economics, contd..

Logic in economics:
post-hoc, ergo propter hoc;
fallacy of composition (e.g. saving & AD)

Cool heads at the service of warm

hearts neutrality in economic
analysis

The 3 problems of economic

organizations
3 problems to be solved
What
How
For whom

How societies have solved them: forms of

economic organization

Tradition
Communal
Feudal
Socialistic-command
Capitalistic-market
mixed

The 3 problems of economic

organizations, contd
How societies have solved them: forms of
economic organization
By organization

Communal
Tradition
Feudal
command
Market
mixed

By ownership
Socialist
Capitalist

Technological limits
Production-possibility curve
Concept of trade-offs
Concept of efficiency

Opportunity cost

Chapter 1
Figure 1-1

The Production Possibilities in a

Graph

Chapter 1
Figure 1-2

The Production-Possibility
Frontier

Chapter 1
Figure 1-3

Economic Growth Shifts

the PPF Outward

Chapter 1
Figure 1-4

Economics Must Choose between

Public Goods and Private Goods

Chapter 1
Figure 1-5

Investment for Future Consumption

Requires Sacrificing Current
Consumption

Chapter 1
Table 1-1

Appendix 1
How to read Graphs

Appendix 1A
Figure 1A-1

Six Possible Pairs of Food-Machine

Production Levels

Appendix 1A
Figure 1A-2

A Production-Possibility Frontier

Appendix 1A
Figure 1A-3

Calculation of Slope for Straight

Lines

Appendix 1A
Figure 1A-4

Steepness Is Not the Same as

Slope

Appendix 1A
Figure 1A-5

Tangent as Slope of Curved

Line

Appendix 1A
Figure 1A-6

Different Slopes of Nonlinear

Curves

Appendix 1A
Figure 1A-7

Shift of Curves versus

Movement along Curves

Appendix 1A
Figure 1A-8

Scatter Diagram of Consumption

Function Shows Important
Macroeconomic Law

Appendix 1A
Table 1A-1