Solutions for Microeconomics Private and Public Choice, 17th Edition Gwartney (All Chapters included)
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Course
Microeconomics
Institution
Microeconomics
Complete Solutions Manual for Microeconomics Private and Public Choice, 17th Edition by James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson ; ISBN13: 9780357134016. (Full Chapters included Chapter 1 to 16 and Special Topic from 1 to 12)....
1. The Economic Approach.
2. So...
Microeconomics
Private and Public Choice
17th Edition
by James D. Gwartney
Complete Chapter Solutions Manual
are included (Ch 1 to 16)
And
Special Topics from (1 to 12)
** Immediate Download
** Swift Response
** All Chapters included
, Chapter 1
The Economic Approach
OUTLINE
I. What Is Economics About?
A. Scarcity means having to make choices.
1. Scarcity and choice are the two essential ingredients of an economic topic.
2. Scarcity is present whenever there is less of a good or resource freely available
than people would like.
a. Scarce goods are called economic goods.
b. Resources are the inputs that people use to produce goods and services and may
include human, physical, and natural resources.
3. Scarcity forces us to choose among available alternatives.
B. Scarcity and poverty are not the same.
1. Scarcity is a factual concept in which limited resources cause our desires for goods
and services to be lacking.
2. Poverty is more subjective in nature; different people have different ideas of what
it means to be “poor.”
3. We may someday eliminate poverty, but scarcity will always be with us.
C. Scarcity necessitates rationing.
1. Every society must have a method to ration the scarce resources among competing
uses.
a. Various factors can be used to ration (first-come, first-served).
b. In a market setting, price is used to ration goods and resources.
c. When price is used, the good or resource is allocated to those willing to give up
“other things” in order to obtain ownership rights.
D. The method of rationing influences the nature of competition.
1. Competition is a natural outgrowth of the need to ration scarce goods.
2. Changing the rationing method used will change the form of competition, but it
will not eliminate competitive tactics.
II. The Economic Way of Thinking
A. Eight guideposts to economic thinking
1. The use of scarce resources is costly, so decision-makers must make trade-offs.
a. Someone must give up something if we are to have more scarce goods.
(1) The highest-valued alternative that must be sacrificed is the opportunity cost
of the choice.
2. Individuals choose purposefully—they try to get the most from their limited
resources.
a. Economizing: gaining a specific benefit at the least possible cost.
, 3. Incentives matter—changes in incentives influence human choices in a predictable
way. Both monetary and nonmonetary incentives matter.
a. As personal benefits (costs) from choosing an option increase, other things
constant, a person will be more (less) likely to choose that option.
4. Individuals make decisions at the margin.
a. Decisions will be based on marginal costs and marginal benefits (utility).
5. Although information can help us make better choices, its acquisition is costly..
6. Beware of the secondary effects: Economic actions often generate indirect as well
as direct effects.
7. The value of a good or service is subjective.
8. The test of a theory is its ability to predict.
III. Positive and Normative Economics
A. Positive economics is the scientific study of “what is” among economic relationships.
1. Positive economic statements can be proved either true or false.
a. Ex: The inflation rate rises when the money supply is increased.
B. Normative economics are judgments about “what ought to be” in economic matters.
1. Normative statements cannot be proved true or false.
a. Ex: The inflation rate should be lower.
IV. Pitfalls to Avoid in Economic Thinking
A. Violation of the ceteris paribus condition can lead one to draw the wrong conclusion.
1. Ceteris paribus is a Latin term meaning “other things constant.”
2. Used when the effect of one change is being described, recognizing that if other
things changed, they also could affect the result.
B. Good intentions do not guarantee desirable outcomes.
1. Policies formed with good intentions may have unintended adverse secondary
effects.
C. Association is not causation.
1. Statistical association alone cannot establish causation.
D. The fallacy of composition: What’s true for one might not be true for all.
1. The fallacy of composition is the erroneous view that what is true for the individual
(or the part) will also be true for the group (or the whole).
2. Microeconomics focuses on narrowly defined units, while macroeconomics
focuses on highly aggregated units.
a. One must beware of the fallacy of composition when shifting from micro to
macro units.
FOCUS QUESTIONS
As you read this chapter, look for answers to the following questions:
• What is scarcity? Why does scarcity necessitate rationing and cause competition?
• What is the economic way of thinking? What is the basic postulate of economics, and why
is it so important?
• What is the difference between positive and normative economics?
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