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1-1 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
CHAPTER 1
ALLEVIATING HUMAN MISERY : THE ROLE OF ECONOMIC
REASONING
THE ROLE OF ECONOMIC REASONING
The terrible destitution of two-thirds of the world’s population, particularly in parts of Southeast Asia and Africa, can bring home vividly to students the core of the economic problem–wants that far exceed the means available to satisfy them. And this same problem of scarcity even exists in the wealthiest of societies. Consequently, a reasonable economic goal for a society might be to minimize the effects of scarcity, that is, to maximize social well being.
We try to draw our students out on what they think is the basis of scarcity. From the listings that we get, we can build on the technical concepts of scarce labor and capital resources, the limited range of technology available for production, and the production possibilities curve. The production possibilities curve is then used to discuss the opportunity cost principle. From this discussion, we address the optimal combination of goods and services within the context of marginal social costs and benefits. Care should be taken here because the cost-benefit decision-making approach used here will be reinforced in later chapters.
We then extend the analysis based on production possibilities to directly address poverty by discussing GDP, per capita GDP, the distribution of GDP, and living standards. Then we consider factors that either do or do not seem to play important roles in the wealth of a given country. These factors include population and population growth, education, and capital accumulation. It should be noted that these same issues are treated in greater detail in the chapter on economic growth.
We encourage additional and independent thinking on what can be done about world poverty. We outline and have our students add to several possible policies that might be useful, both by the lesser- developed countries themselves and by advanced countries that may want to help.
TEACHING OUTLINE
- World Poverty and Economics
- Goods and Services
- Resources
- Labor
- Capital
- Technology
II. The Economic Problem
(Economics of Social Issues 20e Ansel Sharp, Charles Register, Paul Grimes) (Solution Manual all Chapters) 1 / 4
Chapter 01 - Alleviating Human Misery: The Role of Economic Reasoning
1-2 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
- Insatiable wants v Limited means
- Scarcity
- Gross Domestic Product
- Production Possibilities Curves
- Constructing the graph
- Economic Growth
- The Opportunity Cost Principle
- Increasing opportunity cost
- Marginal social cost
- Marginal social benefit
- Cost/benefit analysis
- Well-being and GDP
- Adjusting for inflation
- Real GDP
- Adjusting for population
- GDP per capita
- Adjusting for distribution
- Quality of labor
- Stock of capital and Capital Accumulation
- Technology
- Efficiency
- Population 2 / 4
II. The Capacity of the Economy to Produce
III Causes of Poverty and Economic Growth
Chapter 01 - Alleviating Human Misery: The Role of Economic Reasoning
1-3 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.IV. The Role of Governments
- LDC governments
- Private property rights
- Universal education
- Capital accumulation process
- Social infrastructure
- Population control
- Governments of DCs
- Loans and grants
- Technical assistance
- World Bank
- Summary
CORE ECONOMIC PRINCIPLES
Definition of Economics - This chapter introduces the economics discipline. It is important that students start out with a generalized understanding of what economics is and the overarching definition that allows it to be applied to a wide variety of social issues. A goal here is to prevent students from seeing economics as a set of unrelated issues and ideas and to avoid “supply and demand and stuff” or “all those graphs and laws” as the definition of economics given by students years down the road.
Production Possibilities Curves - The model applied in this chapter is the PPC model. Students need to learn how to use the PPC graph to analyze variety of issues. The PPC is covered in a “Graphic Detail” section.
Gross Domestic Product - GDP is an important economic measure that will be used in a number of later chapters. Students need to understand what GDP does and does not measure, and how it can be useful for analyzing economic issues.
Marginal Social Cost/Marginal Social Benefit - Cost/Benefit analysis, which is central to the analysis of issues in several later chapters, is introduced. A strong foundation at this point can make a big difference in understanding later issues.
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Chapter 01 - Alleviating Human Misery: The Role of Economic Reasoning
1-4 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
RESOURCES
Data Links
To find a rich variety of international economic statistics, go to the International Economics Statistics
Database at http://liber8.stlouisfed.org/iesd/.
The home page for population connection has information and ideas for teaching about population; go
to http://www.populationeducation.org.
The home page of the Population Reference Bureau has curriculum ideas, including “Food for
Thought” at http://www.prb.org.
DATA SOURCES
The following data sources may be used to update and refine the statistics found in this chapter.
• Much of the domestic data in this chapter is available through two sources: 1) Statistical Abstract of the United States, which is published annually and is available at the reference department of most libraries or online through the Bureau of Census at http://www.census.gov/compendia/statab/, and 2) online from the Bureau of Economic Analysis at http://www.bea.gov/. In each case, a great deal more data is available than is used or noted in the text.
• Much of the international data are available from two sources: 1) CIA World Factbook, which is updated continuously on the web, can be found at https://www.cia.gov/library/publications/the- world-factbook/index.html. 2) World Development Report, which is also published annually and can be previewed and ordered online from the World Bank at www.worldbank.org/.
DISCUSSION QUESTIONS
- Discuss the reasons why some countries are poorer than others. What policies would you
- What is the basic economic problem of all societies? Can all wants be satisfied? Why or why
- After studying Table 1-3 in the text, attempt to explain the relationship between population
- What effect does an increase in population have on a country’s PPC? What effect does it have
- Using a production possibilities curve, show and explain (a) the effects of a technological
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recommend to developing countries to promote economic growth?
not?
growth and poverty problems.
on GDP per capita?
improvement on GDP, and (b) the opportunity cost principle.
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