Transcript Chapter 2

2
Economic Models and
Graphs in Economics
Models in Economics
Experiments
Simulations
?
Models in Economics
Equations
Marg. cost/benefit
Marginal Benefit

1  G  p (e) 
p(e)  B   

  

30
25
20
15
10
5
Graphs
As goals increase,
curve shifts.
1 2 3 4 5 6 7
Effort
Positive and Normative Economics
What is or will be?
What ought to be?
“Growth is the main
goal of any economy.”
“Minimum wage laws lead to
greater unemployment.”
“Debt relief will allow thirdworld nations to recover.”
“Employees have a
claim to the profits of a
company.”
Variables and Graphing
1
# firefighters
3
4
5
$2000 $2500 $3000 $3500 $4000
6
5
4
No. of firefighters
Damage ($1,000s)
Damage
2
3
2
1
1 2 3 4 5 6 7
Number of firefighters
Dependent variable
6
5
4
3
2
1
1 2 3 4 5 6 7
Damage ($000s)
Cost ($1,000s)
Slope That Changes Along a Curve
6
5
Draw a line
that touches the curve
at a single point.
4
3
2
1
1 2 3 4 5 6 7
Units produced (000s)
The slope at 2,000 units
=1
The slope of that line
is the slope of the curve
at that point.
The slope at 4,000 units
=2