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Chapter 1 provides a basic illustration of what economics is and why it is useful. Economics is the study of the choices people, firms, and governments make when resources are scarce. Economic analysis helps us understand the consequences of these choices. Here are the main points of the chapter:  Most of modern economics is based on positive analysis, which answers the question ―What is?‖ or ―What will be?‖  Economies must answer three questions: What products do we produce? How do we produce the products? Who consumes the products?  Normative analysis answers the question ―What ought to be?‖  To think like an economist, we (a) use assumptions, (b) use the notion of ceteris paribus, (c) think in marginal terms, and (d) assume that rational people respond to incentives.  Macroeconomics helps us understand why economies grow and understand economic fluctuations. Microeconomics helps us understand how markets work. Learning Objectives: 1.1 What is Economics? List the three key economic questions. 1.2 Economic Analysis and Modern Problems: Discuss the insights from economics for a realworld problem such as congestion. 1.3 The Economic Way of Thinking: List the four elements of the economic way of thinking. 1.4 Employability—Economic Logic on the Job: Explain how studying economics improves a person‘s employment prospects. 1.5 Preview of Coming Attractions—Macroeconomics: List three ways to use macroeconomics. 1.6 Preview of Coming Attractions—Microeconomics: List three ways to use microeconomics. Approaching the Material The first classes are very important in determining your students‘ attitudes toward economics. You have to find out their attitude and use real-world examples that help them understand that economics relates to their lives. Stating to the class that economics is ―The study of how scarce resources are allocated to satisfy unlimited wants‖ is accurate but is also one of the reasons why some people still refer to economics as ―the dismal science.‖ Try the following definition of economics instead: ―Economics is the study of how you, your friends, the stores where you shop, and your mayor make choices.‖ Every student in front of you makes choices everyday—what to wear, what to have for breakfast, or whether to sleep in, whether to study or play video games.
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