, Solution manual for Economics , 14th Edition
Roger A. Arnold
Notes
1- The file is chapter after chapter.
2- We have shown you 10 pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Instructor Manual
Arnold, Economics, ISBN; Chapter 1: What Economics is About
Table of Contents
Purpose and Perspective of the Chapter...................................................................................2
Cengage Supplements......................................................................................................................2
Chapter Objectives............................................................................................................................2
Complete List of Chapter Activities and Assessments..................................................................2
Key Terms...........................................................................................................................................3
What's New in This Chapter.............................................................................................................4
Chapter Outline.................................................................................................................................4
Discussion Questions………………………………………………………………………………………………………..…7
Additional Resources………………………………………………………………………………………………….……….8
Cengage Video
Resources……………………………………………………………………………………………………..……………….8
Appendix ............................................................................................................................................ 9
Generic Rubrics.........................................................................................................................................9
Standard Discussion Rubric ...................................................................................................................... 9
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Purpose and Perspective of the Chapter
The purpose of this chapter is an overview of what economics is and of some of the key
concepts in economics. There are two appendices to this chapter. Appendix A covers
working with graphs—showing how to read a graph including bar graphs, pie charts, and
line graphs as well as how to derive the slope of both a line and a curve. Appendix B
discusses economics as a major and careers for economics majors.
Cengage Supplements
The following product-level supplements provide additional information that may help you
in preparing your course. They are available in the Instructor Resource Center.
Test Bank
PowerPoint Slides
Chapter Objectives
The following objectives are addressed in this chapter:
01.01 Explain how scarcity influences decisions.
01.02 Explain how individuals evaluate opportunity costs to make decisions.
01.03 Explain how marginal analysis influences decision making.
01.04 Explain the difference between positive and normative economics.
01.05 Contrast macroeconomic concepts versus microeconomic concepts.
Complete List of Chapter Activities and Assessments
For additional guidance refer to the Teaching Online Guide.
Chapter PPT slide Activity/Assessment Duration
Objective
01.01 11 Knowledge Check 1a 1 minute
01.01 12 Knowledge Check 1b 1 minute
01.01 13 Knowledge Check 1c 1 minute
01.03 21 Knowledge Check 2a 1 minute
01.02 22 Knowledge Check 2b 1 minute
01.03 23 Knowledge Check 2c 1 minute
01.04 30 Knowledge Check 3a 1 minute
01.04 31 Knowledge Check 3b 1 minute
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
01.04 32 Knowledge Check 3c 1 minute
[return to top]
Key Terms
Abstract: The process (used in building a theory) of focusing on a limited number of
variables to explain or predict an event.
Bad: Anything from which individuals receive disutility or dissatisfaction.
Capital: Produced goods—such as factories, machinery, tools, computers, and buildings—
that can be used as inputs for further production.
Ceteris Paribus: A Latin term meaning all other things constant or nothing else changes.
Decisions at the Margin: Decision making characterized by weighing the additional
(marginal) benefits of a change against the additional (marginal) costs of a change with
respect to current conditions.
Disutility: The dissatisfaction one receives from a bad.
Economics: The science of scarcity; the science of how individuals and societies deal with
the fact that wants are greater than the limited resources available to satisfy those wants.
Efficiency: Exists when marginal benefits equal marginal costs.
Entrepreneurship: The talent that some people have for organizing the resources of land,
labor, and capital to produce goods, seek new business opportunities, and develop new
ways of doing things.
Exchange (Trade): The giving up of one thing for something else.
Good: Anything from which individuals receive utility or satisfaction.
Incentive: Something that encourages or motivates a person to undertake an action.
Land: All natural resources, such as minerals, forests, water, and unimproved land.
Macroeconomics: The branch of economics that deals with human behavior and choices
as they relate to highly aggregate markets (e.g., the market for goods and services) or the
entire economy.
Marginal Benefits (MB): Additional benefits; the benefits connected with consuming an
additional unit of a good or undertaking one more unit of an activity.
Marginal Costs (MC): The change in total cost that results from a change in quantity of
output: MC = TC / DQ.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Microeconomics: The branch of economics that deals with human behavior and choices as
they relate to relatively small units: an individual, a firm, an industry, a single market.
Normative Economics: The study of what should be in economics.
Opportunity Cost: The most highly valued opportunity or alternative forfeited when a
choice is made.
Positive Economics: The study of what is in economics.
Rationing Device: A means for deciding who gets what of available resources and goods.
Scarcity: The condition in which our wants are greater than the limited resources available
to satisfy those wants.
Theory: An abstract representation of the real world designed with the intent to better
understand it.
Utility: A measure of the satisfaction, happiness, or benefit that results from the
consumption of a good.
[return to top]
What's New in This Chapter
The following elements are improvements in this chapter from the previous edition:
New Economics 24/7 Feature: Movie Studios Versus Netflix: Incentives Matter
[return to top]
Chapter Outline
I. Your Life, 2024-2034 (01.01, PPT Slide 4-5)
a. The answers to many of life’s questions have to do with economics
The study of economics is relevant to everyone’s lives today and tomorrow.
With the help of economics, one can find specific answers to questions
such as “How much will one earn as salary after college?” “What is one’s life
going to be like past 2024”, etc.
II. A Definition of Economics (01.01, PPT 6-10)
a. Goods and Bads
Economists talk about goods (anything that gives a person utility) and bads
(anything that gives a person disutility). People will voluntarily consume
goods (example: an apple) and they do not voluntarily consume bads
(example: a rotten apple).
b. Resources
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Economists divide resources into four broad categories: land, labor, capital,
and entrepreneurship. The resources are what are used to produce the
goods.
c. Scarcity and a Definition of Economics
Scarcity is the condition where our wants are greater than the limited
resources available to satisfy them. Scarcity is the basic economic problem
confronting all individuals and societies. For this reason, economics is
defined as the science of how individuals and societies deal with the fact
that wants are greater than the limited resources available to satisfy those
wants.
d. Scarcity’s Effects
Scarcity affects everyone. Three effects of scarcity are (1) the need to make
choices, (2) the need for a rationing device, and (3) competition. Because of
the limited resources, not everyone is going to get what they want so
people need to make choices. Because of the limited resources, a rationing
device becomes the distribution of the resources. Ask students to think of
some examples of rationing devices that are used. An optional activity is to
bring a few candies and ask the students how they should be rationed to
the students. Examples are price/auction, first-come-first-serve, random,
brute force, etc. No matter what the rationing device, people will compete
for it.
III. Key Concepts in Economics (01.02, 01.03, PPT 15-20)
a. Opportunity Cost
The opportunity cost of anything is the most highly valued opportunity or
alternative forfeited when a choice is made. Opportunity costs are incurred
whenever choices are made because the resources used for those choices
could have been used in other ways. The higher the opportunity cost of
doing something, the less likely it will be done. A behavior will change when
the opportunity cost changes. Example: a student gives up $10/hour in a
job to come to a one-hour class, that is the opportunity cost. If the boss
offers the student $100 to miss class, now the opportunity cost has
changed, and the student will change their behavior and miss class to work.
b. Benefits and Costs
Economists are careful to think in terms of both costs and benefits. When
thinking of benefits, the costs must also be considered. Often, the costs can
be too high to make the benefits worth it. Ask students for examples of
where the costs are too high for the benefits.
c. Decisions Made at the Margin
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Decision making at the margin is characterized by weighing additional
(marginal) benefits of a change against the additional (marginal) costs of a
change with respect to current conditions. Individuals make decisions at
the margin. Example: a student has a choice to attend class or skip. The
decision for a specific class period is not on the total benefit of the class or
the college education but the additional benefit of that specific class to the
additional cost of missing that class period.
d. Efficiency
The right amount of anything is the optimal or efficient amount: the
amount for which the marginal benefits equal the marginal costs. Net
benefits are maximized when efficiency is achieved.
e. Incentives and Unintended Effects
An incentive is something that encourages or motivates a person to
undertake an action. Individuals have an incentive to undertake actions for
which the benefits are greater than the costs or, stated differently, for
which they expect to receive net benefits (benefits greater than costs).
Examples of incentives that change people’s behavior are monetary
incentives (pay people) or social incentives (peer pressure). Economists try
to look at the unintended effects of an action. Often, the incentives have
unintended effects in that human behavior does not respond as planned.
Example is the cobra effect where the unintended effects make the
situation worse. Optional is to show a YouTube video of the cobra effect.
f. Exchange
Exchange or trade is the process of giving up one thing for something else.
People enter into exchanges in order to make themselves better off.
IV. Ceteris Paribus and Theory (01.04, PPT 24-26)
a. Ceteris Paribus Thinking
Ceteris paribus means “all other things held constant” or “nothing else
changes.” Invoking this assumption allows us to clearly designate what we
believe is the correct relationship between two variables.
b. What is a Theory?
Economists build theories to answer questions that do not have obvious
answers. To an economist, a theory is an abstract representation of the
world. When they build a theory, they leave out certain things and focus on
the major factors or variables that they believe will explain the
phenomenon they are trying to understand. A theory emphasizes only the
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
variables that the theorist believes are the main or critical ones that explain
an activity or event.
V. Economic Categories (01.04, 01.04, PPT 27-29)
a. Positive versus Normative
Positive economics addresses what is, while normative economics attempts
to determine what should be. This introductory course in economics mainly
deals with positive economics because you need to know the what is
before you can discuss the what should be or you may have many
unintended consequences.
b. Microeconomics versus Macroeconomics
Microeconomics is the study of human behavior and choices as they relate
to relatively small units, such as an individual, a firm, an industry, or a
single market. Macroeconomics is the study of human behavior and
choices as they relate to an entire economy. Think of the microeconomics
as the birds in the sky as each bird is making its own decision and
macroeconomics is the entire flock of birds. They are separated as different
branches in economics as they have different theories, but they impacted
each other. One bird’s decision affects the entire flock, and the entire flock
impacts each individual bird.
Discussion Questions
You can assign these questions several ways: in a discussion forum in your LMS; as whole-
class discussions in person; or as a partner or group activity in class.
1. Discussion: Scarcity (01.01) Duration 5 minutes.
a. Give an example of how the existence of scarcity leads to the need to make
choices, the need for a rationing device, and competition.
i. Answers will vary. Example: Many colleges and universities have
more applicants for freshman admission than spaces available. This
creates the need for the school to make choices among those
applicants. The school will then need to develop some rationing
devices to help make its selections. Students will then compete for the
coveted spots and be evaluated based on the school’s chosen
rationing devices.
2. Discussion: Decisions Made at the Margin (01.03) Duration 10 minutes.
a. Using the concepts of marginal costs and marginal benefits, discuss a
situation in which you had to “make a decision at the margin.” Your example
could come from your personal life or from a decision that you have had to
make at work.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 7
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
i. Answers will vary. Example: At the beginning of the semester, you are
trying to decide between signing up for three or four courses. To
make this decision, you examine the marginal benefits of taking one
more course (for example, finishing your degree sooner) and the
marginal costs of taking one more course (money for books and
materials, less time to study for other classes, potential lost income
from not being able to work as much, etc.) and decide to take the
additional course only if the marginal benefits are at least as great as
the marginal costs.
ii.
3. Discussion: Microeconomics and Macroeconomics (01.05) Duration 5 minutes.
a. In your own words, describe the difference between macroeconomics and
microeconomics. Give an example of a question a macroeconomist might be
interested in answering and an example of a question a microeconomist
might be interested in answering (without repeating the examples provided
in the textbook).
i. Answers will vary. Example: Macroeconomics is the study of how
people behave and make choices on an aggregate level, whereas
microeconomics is the study of how people behave and make choices
relating to the units that make up the economy. An example of a
question that a macroeconomist might be interested in answering is:
How do the actions of the Federal Reserve impact the country’s
inflation rate? An example of a question that a microeconomist might
be interested in answering is: How does an increase in interest rates
impact the demand for new automobiles?
[return to top]
Additional Resources
Cengage Video Resources
MindTap Videos:
o Video Lecture: Scarcity
o Video Lecture: Opportunity Cost
o Video Lecture: Efficiency
o Economics In 5 Minutes: Decisions at the Margin
o Economics In 5 Minutes: Theory
o Graphing Basics
o Areas
o Equation Basics
o Equivalency of Fractions, Decimals, and Percentages
o Video Problem Walk-Through 1.1: Opportunity Cost
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 8
website, in whole or in part.
Roger A. Arnold
Notes
1- The file is chapter after chapter.
2- We have shown you 10 pages.
3- The file contains all Appendix and Excel
sheet if it exists.
4- We have all what you need, we make
update at every time. There are many
new editions waiting you.
5- If you think you purchased the wrong file
You can contact us at every time, we can
replace it with true one.
Our email:
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Instructor Manual
Arnold, Economics, ISBN; Chapter 1: What Economics is About
Table of Contents
Purpose and Perspective of the Chapter...................................................................................2
Cengage Supplements......................................................................................................................2
Chapter Objectives............................................................................................................................2
Complete List of Chapter Activities and Assessments..................................................................2
Key Terms...........................................................................................................................................3
What's New in This Chapter.............................................................................................................4
Chapter Outline.................................................................................................................................4
Discussion Questions………………………………………………………………………………………………………..…7
Additional Resources………………………………………………………………………………………………….……….8
Cengage Video
Resources……………………………………………………………………………………………………..……………….8
Appendix ............................................................................................................................................ 9
Generic Rubrics.........................................................................................................................................9
Standard Discussion Rubric ...................................................................................................................... 9
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 1
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Purpose and Perspective of the Chapter
The purpose of this chapter is an overview of what economics is and of some of the key
concepts in economics. There are two appendices to this chapter. Appendix A covers
working with graphs—showing how to read a graph including bar graphs, pie charts, and
line graphs as well as how to derive the slope of both a line and a curve. Appendix B
discusses economics as a major and careers for economics majors.
Cengage Supplements
The following product-level supplements provide additional information that may help you
in preparing your course. They are available in the Instructor Resource Center.
Test Bank
PowerPoint Slides
Chapter Objectives
The following objectives are addressed in this chapter:
01.01 Explain how scarcity influences decisions.
01.02 Explain how individuals evaluate opportunity costs to make decisions.
01.03 Explain how marginal analysis influences decision making.
01.04 Explain the difference between positive and normative economics.
01.05 Contrast macroeconomic concepts versus microeconomic concepts.
Complete List of Chapter Activities and Assessments
For additional guidance refer to the Teaching Online Guide.
Chapter PPT slide Activity/Assessment Duration
Objective
01.01 11 Knowledge Check 1a 1 minute
01.01 12 Knowledge Check 1b 1 minute
01.01 13 Knowledge Check 1c 1 minute
01.03 21 Knowledge Check 2a 1 minute
01.02 22 Knowledge Check 2b 1 minute
01.03 23 Knowledge Check 2c 1 minute
01.04 30 Knowledge Check 3a 1 minute
01.04 31 Knowledge Check 3b 1 minute
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 2
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
01.04 32 Knowledge Check 3c 1 minute
[return to top]
Key Terms
Abstract: The process (used in building a theory) of focusing on a limited number of
variables to explain or predict an event.
Bad: Anything from which individuals receive disutility or dissatisfaction.
Capital: Produced goods—such as factories, machinery, tools, computers, and buildings—
that can be used as inputs for further production.
Ceteris Paribus: A Latin term meaning all other things constant or nothing else changes.
Decisions at the Margin: Decision making characterized by weighing the additional
(marginal) benefits of a change against the additional (marginal) costs of a change with
respect to current conditions.
Disutility: The dissatisfaction one receives from a bad.
Economics: The science of scarcity; the science of how individuals and societies deal with
the fact that wants are greater than the limited resources available to satisfy those wants.
Efficiency: Exists when marginal benefits equal marginal costs.
Entrepreneurship: The talent that some people have for organizing the resources of land,
labor, and capital to produce goods, seek new business opportunities, and develop new
ways of doing things.
Exchange (Trade): The giving up of one thing for something else.
Good: Anything from which individuals receive utility or satisfaction.
Incentive: Something that encourages or motivates a person to undertake an action.
Land: All natural resources, such as minerals, forests, water, and unimproved land.
Macroeconomics: The branch of economics that deals with human behavior and choices
as they relate to highly aggregate markets (e.g., the market for goods and services) or the
entire economy.
Marginal Benefits (MB): Additional benefits; the benefits connected with consuming an
additional unit of a good or undertaking one more unit of an activity.
Marginal Costs (MC): The change in total cost that results from a change in quantity of
output: MC = TC / DQ.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 3
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Microeconomics: The branch of economics that deals with human behavior and choices as
they relate to relatively small units: an individual, a firm, an industry, a single market.
Normative Economics: The study of what should be in economics.
Opportunity Cost: The most highly valued opportunity or alternative forfeited when a
choice is made.
Positive Economics: The study of what is in economics.
Rationing Device: A means for deciding who gets what of available resources and goods.
Scarcity: The condition in which our wants are greater than the limited resources available
to satisfy those wants.
Theory: An abstract representation of the real world designed with the intent to better
understand it.
Utility: A measure of the satisfaction, happiness, or benefit that results from the
consumption of a good.
[return to top]
What's New in This Chapter
The following elements are improvements in this chapter from the previous edition:
New Economics 24/7 Feature: Movie Studios Versus Netflix: Incentives Matter
[return to top]
Chapter Outline
I. Your Life, 2024-2034 (01.01, PPT Slide 4-5)
a. The answers to many of life’s questions have to do with economics
The study of economics is relevant to everyone’s lives today and tomorrow.
With the help of economics, one can find specific answers to questions
such as “How much will one earn as salary after college?” “What is one’s life
going to be like past 2024”, etc.
II. A Definition of Economics (01.01, PPT 6-10)
a. Goods and Bads
Economists talk about goods (anything that gives a person utility) and bads
(anything that gives a person disutility). People will voluntarily consume
goods (example: an apple) and they do not voluntarily consume bads
(example: a rotten apple).
b. Resources
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 4
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Economists divide resources into four broad categories: land, labor, capital,
and entrepreneurship. The resources are what are used to produce the
goods.
c. Scarcity and a Definition of Economics
Scarcity is the condition where our wants are greater than the limited
resources available to satisfy them. Scarcity is the basic economic problem
confronting all individuals and societies. For this reason, economics is
defined as the science of how individuals and societies deal with the fact
that wants are greater than the limited resources available to satisfy those
wants.
d. Scarcity’s Effects
Scarcity affects everyone. Three effects of scarcity are (1) the need to make
choices, (2) the need for a rationing device, and (3) competition. Because of
the limited resources, not everyone is going to get what they want so
people need to make choices. Because of the limited resources, a rationing
device becomes the distribution of the resources. Ask students to think of
some examples of rationing devices that are used. An optional activity is to
bring a few candies and ask the students how they should be rationed to
the students. Examples are price/auction, first-come-first-serve, random,
brute force, etc. No matter what the rationing device, people will compete
for it.
III. Key Concepts in Economics (01.02, 01.03, PPT 15-20)
a. Opportunity Cost
The opportunity cost of anything is the most highly valued opportunity or
alternative forfeited when a choice is made. Opportunity costs are incurred
whenever choices are made because the resources used for those choices
could have been used in other ways. The higher the opportunity cost of
doing something, the less likely it will be done. A behavior will change when
the opportunity cost changes. Example: a student gives up $10/hour in a
job to come to a one-hour class, that is the opportunity cost. If the boss
offers the student $100 to miss class, now the opportunity cost has
changed, and the student will change their behavior and miss class to work.
b. Benefits and Costs
Economists are careful to think in terms of both costs and benefits. When
thinking of benefits, the costs must also be considered. Often, the costs can
be too high to make the benefits worth it. Ask students for examples of
where the costs are too high for the benefits.
c. Decisions Made at the Margin
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 5
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
Decision making at the margin is characterized by weighing additional
(marginal) benefits of a change against the additional (marginal) costs of a
change with respect to current conditions. Individuals make decisions at
the margin. Example: a student has a choice to attend class or skip. The
decision for a specific class period is not on the total benefit of the class or
the college education but the additional benefit of that specific class to the
additional cost of missing that class period.
d. Efficiency
The right amount of anything is the optimal or efficient amount: the
amount for which the marginal benefits equal the marginal costs. Net
benefits are maximized when efficiency is achieved.
e. Incentives and Unintended Effects
An incentive is something that encourages or motivates a person to
undertake an action. Individuals have an incentive to undertake actions for
which the benefits are greater than the costs or, stated differently, for
which they expect to receive net benefits (benefits greater than costs).
Examples of incentives that change people’s behavior are monetary
incentives (pay people) or social incentives (peer pressure). Economists try
to look at the unintended effects of an action. Often, the incentives have
unintended effects in that human behavior does not respond as planned.
Example is the cobra effect where the unintended effects make the
situation worse. Optional is to show a YouTube video of the cobra effect.
f. Exchange
Exchange or trade is the process of giving up one thing for something else.
People enter into exchanges in order to make themselves better off.
IV. Ceteris Paribus and Theory (01.04, PPT 24-26)
a. Ceteris Paribus Thinking
Ceteris paribus means “all other things held constant” or “nothing else
changes.” Invoking this assumption allows us to clearly designate what we
believe is the correct relationship between two variables.
b. What is a Theory?
Economists build theories to answer questions that do not have obvious
answers. To an economist, a theory is an abstract representation of the
world. When they build a theory, they leave out certain things and focus on
the major factors or variables that they believe will explain the
phenomenon they are trying to understand. A theory emphasizes only the
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 6
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
variables that the theorist believes are the main or critical ones that explain
an activity or event.
V. Economic Categories (01.04, 01.04, PPT 27-29)
a. Positive versus Normative
Positive economics addresses what is, while normative economics attempts
to determine what should be. This introductory course in economics mainly
deals with positive economics because you need to know the what is
before you can discuss the what should be or you may have many
unintended consequences.
b. Microeconomics versus Macroeconomics
Microeconomics is the study of human behavior and choices as they relate
to relatively small units, such as an individual, a firm, an industry, or a
single market. Macroeconomics is the study of human behavior and
choices as they relate to an entire economy. Think of the microeconomics
as the birds in the sky as each bird is making its own decision and
macroeconomics is the entire flock of birds. They are separated as different
branches in economics as they have different theories, but they impacted
each other. One bird’s decision affects the entire flock, and the entire flock
impacts each individual bird.
Discussion Questions
You can assign these questions several ways: in a discussion forum in your LMS; as whole-
class discussions in person; or as a partner or group activity in class.
1. Discussion: Scarcity (01.01) Duration 5 minutes.
a. Give an example of how the existence of scarcity leads to the need to make
choices, the need for a rationing device, and competition.
i. Answers will vary. Example: Many colleges and universities have
more applicants for freshman admission than spaces available. This
creates the need for the school to make choices among those
applicants. The school will then need to develop some rationing
devices to help make its selections. Students will then compete for the
coveted spots and be evaluated based on the school’s chosen
rationing devices.
2. Discussion: Decisions Made at the Margin (01.03) Duration 10 minutes.
a. Using the concepts of marginal costs and marginal benefits, discuss a
situation in which you had to “make a decision at the margin.” Your example
could come from your personal life or from a decision that you have had to
make at work.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible 7
website, in whole or in part.
, Instructor Manual: Arnold, Economics, ISBN; Chapter 1: What Economics is About
i. Answers will vary. Example: At the beginning of the semester, you are
trying to decide between signing up for three or four courses. To
make this decision, you examine the marginal benefits of taking one
more course (for example, finishing your degree sooner) and the
marginal costs of taking one more course (money for books and
materials, less time to study for other classes, potential lost income
from not being able to work as much, etc.) and decide to take the
additional course only if the marginal benefits are at least as great as
the marginal costs.
ii.
3. Discussion: Microeconomics and Macroeconomics (01.05) Duration 5 minutes.
a. In your own words, describe the difference between macroeconomics and
microeconomics. Give an example of a question a macroeconomist might be
interested in answering and an example of a question a microeconomist
might be interested in answering (without repeating the examples provided
in the textbook).
i. Answers will vary. Example: Macroeconomics is the study of how
people behave and make choices on an aggregate level, whereas
microeconomics is the study of how people behave and make choices
relating to the units that make up the economy. An example of a
question that a macroeconomist might be interested in answering is:
How do the actions of the Federal Reserve impact the country’s
inflation rate? An example of a question that a microeconomist might
be interested in answering is: How does an increase in interest rates
impact the demand for new automobiles?
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Additional Resources
Cengage Video Resources
MindTap Videos:
o Video Lecture: Scarcity
o Video Lecture: Opportunity Cost
o Video Lecture: Efficiency
o Economics In 5 Minutes: Decisions at the Margin
o Economics In 5 Minutes: Theory
o Graphing Basics
o Areas
o Equation Basics
o Equivalency of Fractions, Decimals, and Percentages
o Video Problem Walk-Through 1.1: Opportunity Cost
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