Principles of Economics

Principles of Economics (Asia Pacific Edi�on) 9e Joshua Gans, Stephen King, Mar�n Byford, Gregory Mankiw (Instructor Manual All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Principles of Microeconomics 9th Edi�on Instructor Manual

JOSHUA GANS

STEPHEN KING

Part 1

MARTIN BYFORD

GREGORY MANKIW 2 / 4

Principles of Microeconomics – 9th

edition 1 Chapter 1 Ten lessons from economics Contents Learning objectives ........................................................................................................................................... 2 Key points ......................................................................................................................................................... 2 Chapter outline .................................................................................................................................................. 2 Introduction ................................................................................................................................................... 2 How people make decisions .......................................................................................................................... 3 How people interact ...................................................................................................................................... 4 How the economy as a whole works ............................................................................................................. 5 Conclusion .................................................................................................................................................... 6 Adjunct teaching tips and warm-up activities ................................................................................................... 6 Check your understanding solutions .................................................................................................................. 6 LO1.1 How people make decisions .......................................................................................................... 6 LO1.2 How people interact ....................................................................................................................... 7 LO1.3 How the economy as a whole works: ............................................................................................ 7 Case study solutions .......................................................................................................................................... 7 Choosing when the stork comes ................................................................................................................ 7 Apply and revise solutions ................................................................................................................................ 7 Practice questions solutions .............................................................................................................................. 8 Multiple choice ............................................................................................................................................. 8 Problems and applications ............................................................................................................................. 8

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Principles of Microeconomics – 9th

edition

2 Begin by pointing out that economics is a subject that students must confront in their everyday lives. Point out that they already spend a great deal of their time thinking

about economic issues: prices, buying decisions, use of their time, etc.

You will want to start the semester by explaining to students that economics is by and large a subject of logic; however, part of learning economics is understanding a new vocabulary. In order to have a productive discourse, economists generally use very precise (and sometimes different) definitions for words that are commonly used outside of the economics discipline. The use of such precise language is common to other disciplines. Therefore, it will be helpful to students if you follow the definitions provided in the text as much as possible.Learning objectives

After reading this chapter, students should be able to:

•recognise that people face trade-offs when they make decisions, and discuss how the nature of these trade-offs influences their behaviour •explain why trade among people or nations can be good for everyone, and discuss why markets are a good, but not perfect, way to allocate resources •identify the factors that drive some significant trends in the overall economy.Key points •The fundamental lessons about individual decision making are that people face trade-offs among alternative goals, that the cost of any action is measured in terms of forgone opportunities, that rational people make decisions by comparing marginal costs and marginal benefits, and that people change their behaviour in response to the incentives they face.•The fundamental lessons about interactions among people are that trade can be mutually beneficial, that markets are usually a good way of coordinating trade among people and that the government can potentially improve market outcomes if there is some market failure or if the market outcome is inequitable.•The fundamental lessons about the economy as a whole are that productivity is the ultimate source of living standards, that money growth is the ultimate source of inflation and that society faces a short- run trade-off between inflation and unemployment.Chapter outline Introduction •The word ‘economy’ comes from the Greek word oikonomos, meaning ‘one who manages a household’. This makes some sense, since in the economy we are faced with many decisions (just as a household is).

•The fundamental economic problem: resources are scarce.

•Definition: scarcity – the limited nature of society’s resources.

•Definition: economics – the study of how society manages its scarce resources.Do not underestimate how challenging these principles will be for the student because most first-year university students have limited experience with viewing the world from a cause-and-effect perspective. This is a good time to emphasise that there are known reasons for why many things work the way they do in the real world. Although we cannot predict the behaviour of any one individual, centuries of observation and analysis have uncovered several general rules explaining the decisions and behaviours of large numbers of individuals..

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