Exploring Macroeconomics
8th Edition by Robert L. Sexton
Complete Chapter Solutions Manual
are included (Ch 1 to 21)
** Immediate Download
** Swift Response
** All Chapters included
** Quizzes and Problems
,Instructor Manual
Chapter 1: The Role and Method of Economics
Learning Outcomes
After reading this chapter, the student should be able to:
1.1 Define and describe what is meant by the term economics
1.2 Describe what economists mean when the say that people engage in rational
behavior and respond to incentives in predictable ways
1.3 Define and explain economic theories and models
1.4 Describe the difference between correlation and causation
1.5 Define and explain the distinction between positive statements and normative
statements
Chapter Outcome
After completing this chapter and the associated materials, the student will be able to evaluate
the central constructs, theories, models, and methodologies of economics.
Context and Purpose
Many issues in our lives are at least partly economic in character. Economics is a unique way
of analyzing many areas of human behavior. Indeed, the range of topics to which economic
analysis can be applied is broad. Many researchers discover that the economic approach to
human behavior sheds light on social problems that have been with us for a long time:
discrimination, crime, divorce, political favoritism, and more.
However, before we delve into the details and models of economics, it is important
that we present an overview of how economists approach problems—their methodology.
How does an economist apply the logic of science to approach a problem? And what are the
pitfalls that economists should avoid in economic thinking? We will also discuss why
economists disagree.
Key Points
• Economics is the study of choices we make among our many wants and desires given
our limited resources (inputs used to produce goods and services).
• Scarcity refers to the situation that exists because our unlimited wants exceed our
limited resources.
, • By self-interest, economists simply mean that people try to improve their own
situation (as they see it, not necessarily as others see it). Self-interest can also include
benevolence.
• When economists use the term self-interest, they are not implying that people are
invariably selfish. Many acts of selfless behavior may be self-interested. For example,
people may be kind to others in hopes that the same behavior will be returned.
• To an economist, rational behavior merely means that people do the best they can,
based on their values and the available information, under current and anticipated
future circumstances.
• Theories and models are explanations of how things work that help us understand
and predict how and why economic agents such as consumers, producers, firms,
government, and so on behave the way they do. That is, we use theories and models to
observe how people really behave.
• A good economic theory or model weeds out the irrelevant facts from the relevant
ones. We must abstract. Without abstraction or simplification, the world is too
complex to analyze.
• In economic theory, a hypothesis is a testable prediction about how people will
behave or react to a change in economic circumstances. Empirical analysis is the use
of data to test a hypothesis.
• Virtually all economic theories share a condition usually expressed by the Latin
phrase ceteris paribus. A rough translation of this phrase is “letting everything else be
equal” or “holding everything else constant.” When economists try to assess the effect
of one variable on another, they must keep the relationship between the two variables
isolated from other events that might also influence the situation that the theory tries
to explain or predict.
• Microeconomics deals with the smaller units within the economy, attempting to
understand the decision-making behavior of firms and households and their
interaction in markets for particular goods or services. Macroeconomics, in contrast,
deals with the aggregate, or total, economy; it looks at economic problems as they
influence the whole of society.
• One must always be careful not to confuse correlation with causation. In other
words, the fact that two events usually occur together (correlation) does not
necessarily mean that one caused the other to occur (causation).
8th Edition by Robert L. Sexton
Complete Chapter Solutions Manual
are included (Ch 1 to 21)
** Immediate Download
** Swift Response
** All Chapters included
** Quizzes and Problems
,Instructor Manual
Chapter 1: The Role and Method of Economics
Learning Outcomes
After reading this chapter, the student should be able to:
1.1 Define and describe what is meant by the term economics
1.2 Describe what economists mean when the say that people engage in rational
behavior and respond to incentives in predictable ways
1.3 Define and explain economic theories and models
1.4 Describe the difference between correlation and causation
1.5 Define and explain the distinction between positive statements and normative
statements
Chapter Outcome
After completing this chapter and the associated materials, the student will be able to evaluate
the central constructs, theories, models, and methodologies of economics.
Context and Purpose
Many issues in our lives are at least partly economic in character. Economics is a unique way
of analyzing many areas of human behavior. Indeed, the range of topics to which economic
analysis can be applied is broad. Many researchers discover that the economic approach to
human behavior sheds light on social problems that have been with us for a long time:
discrimination, crime, divorce, political favoritism, and more.
However, before we delve into the details and models of economics, it is important
that we present an overview of how economists approach problems—their methodology.
How does an economist apply the logic of science to approach a problem? And what are the
pitfalls that economists should avoid in economic thinking? We will also discuss why
economists disagree.
Key Points
• Economics is the study of choices we make among our many wants and desires given
our limited resources (inputs used to produce goods and services).
• Scarcity refers to the situation that exists because our unlimited wants exceed our
limited resources.
, • By self-interest, economists simply mean that people try to improve their own
situation (as they see it, not necessarily as others see it). Self-interest can also include
benevolence.
• When economists use the term self-interest, they are not implying that people are
invariably selfish. Many acts of selfless behavior may be self-interested. For example,
people may be kind to others in hopes that the same behavior will be returned.
• To an economist, rational behavior merely means that people do the best they can,
based on their values and the available information, under current and anticipated
future circumstances.
• Theories and models are explanations of how things work that help us understand
and predict how and why economic agents such as consumers, producers, firms,
government, and so on behave the way they do. That is, we use theories and models to
observe how people really behave.
• A good economic theory or model weeds out the irrelevant facts from the relevant
ones. We must abstract. Without abstraction or simplification, the world is too
complex to analyze.
• In economic theory, a hypothesis is a testable prediction about how people will
behave or react to a change in economic circumstances. Empirical analysis is the use
of data to test a hypothesis.
• Virtually all economic theories share a condition usually expressed by the Latin
phrase ceteris paribus. A rough translation of this phrase is “letting everything else be
equal” or “holding everything else constant.” When economists try to assess the effect
of one variable on another, they must keep the relationship between the two variables
isolated from other events that might also influence the situation that the theory tries
to explain or predict.
• Microeconomics deals with the smaller units within the economy, attempting to
understand the decision-making behavior of firms and households and their
interaction in markets for particular goods or services. Macroeconomics, in contrast,
deals with the aggregate, or total, economy; it looks at economic problems as they
influence the whole of society.
• One must always be careful not to confuse correlation with causation. In other
words, the fact that two events usually occur together (correlation) does not
necessarily mean that one caused the other to occur (causation).
