Slide 2 Uncle Sam wants you to do better in economics. Slide 3
Universities awarded 16,141 economics degrees last year at 272
colleges & universities which is up 40% in five years. There
has been a clear explosion of economics as a major, particularly at
the top colleges. Universities awarded 16,141 economics degrees
last year at 272 colleges & universities which is up 40% in
five years. There has been a clear explosion of economics as a
major, particularly at the top colleges. Econ, Econ, Econ, Econ, I
want to major in Econ. WSJ 2006 Economics At New York University,
the economics major has doubled in 10 years. At 800, it is now the
most popular major. Economics is also the number one major at
Harvard (964 students), Columbia (up 67% in 5 years), Stanford,
Penn, Princeton, Chicago (24% of graduating class), & 2 nd at
Brown, Yale, and University of California at Berkeley. At New York
University, the economics major has doubled in 10 years. At 800, it
is now the most popular major. Economics is also the number one
major at Harvard (964 students), Columbia (up 67% in 5 years),
Stanford, Penn, Princeton, Chicago (24% of graduating class), &
2 nd at Brown, Yale, and University of California at Berkeley. The
increase in the numbers is the result of many students seeing The
increase in the numbers is the result of many students seeing
economics as the best vehicle promising good pay & se curity.
economics as the best vehicle promising good pay & se curity.
Students realize that understanding economics has become a Students
realize that understanding economics has become a fundamental
necessity of life. Economics rising popularity is fundamental
necessity of life. Economics rising popularity is even global. Econ
majors in Poland have doubled in 6 years. even global. Econ majors
in Poland have doubled in 6 years. In Russia, econ majors have
jumped from 18% of students to 31%. The chairman of the economics
department at London School of Economics says economics popularity
is at an all time high. In Russia, econ majors have jumped from 18%
of students to 31%. The chairman of the economics department at
London School of Economics says economics popularity is at an all
time high. [up 40%] Slide 4 1.Computer Engineering $104,000
2.Economics$97,800 3. 3.Electrical Engineering$96,100 4. 4.Computer
Science $94,000 5.Mechanical Engineering$88,100 6. 6.Finance$84,400
7. 7.Mathematics$82,200 8.Civil Engineering$81,700 9.Nurse
Practitioner$81,300 10. Political Science$74,400 11.
Marketing$72,300 12. Accounting$72,500 13. History$68,000 14.
Physical Therapist$66,000 15. Business Management$64,900 16.
Communications$64,300 17. English$62,300 18. Biology$60,000 19.
Sociology$55,900 20. Graphic Designs$54,700 21. Psychology$54,000
22. Criminal Justice$53,400 Econ,Econ Payscale.com Slide 5 Heads of
State George H. W. Bush, US President (Yale) Ronald Reagan, US
President (Eureka College) Gerald Ford, US President (University of
Michigan) Ernesto Zedillo, former President of Mexico (Yale
University, PhD) Carlos Salinas de Gortari, former President of
Mexico (Harvard University, PhD) CEOs Ted Turner, CEO CNN, Atlanta
Braves/Hawks (Brown) Scott McNealy, CEO, Sun Microsystems (Harvard)
Donald Trump, Real Estate/TV Mogul (University of Pennsylvania-
Wharton) Warren Buffet, Financier (Columbia School of Business,
Master's in Economics) Sam Walton, Founder of Wal-Mart, (University
of Missouri) Legislators, Justices, and Government Officials Phil
Gramm, US Senator (University of Georgia, PhD) Sandra Day-O'Connor,
US Supreme Court Justice (Stanford) Barbara Boxer, US Senator
(Brooklyn College)Actors/Entertainers Arnold Schwarzenegger,
Actor/Governor (University of Wisconsin) Young M.C., Singer
(University of Southern California) Danny Glover, Actor (University
of San Francisco) Paul Newman, Actor (Kenyon College) Cate
Blanchett, Actress (Melbourne University) Lionel Richie,
Singer/Songwriter (Tuskegee University) Ben Stein, Actor/political
speechwriter (Columbia University) Professional Athletes John
Elway, NFL quarterback (Stanford) Tiger Woods, Golfer (Stanford)
Jennifer Azzi, WNBA guard Utah Starzz (Stanford) Lenny Wilkens, NBA
Coach/Hall of Famer (Providence College) Bill Belichick, NFL Head
Coach--Patriots (Wesleyan University) Michael Johnson, Olympic Gold
Medalistt, (Baylor) Slide 6 Heres a look at the weight placed on
four major college admission class ranksteady decline factors. Only
class rank has shown a steady decline. They would rather see a C in
AP Econ than an A in regular econ. They then know you can do
college work. Only about 43% of all entering college freshmen ever
graduate. Slide 7 No horn of plenty Scarcity Choices What is given
up ECONOMICS Unlimited Needs and Wants Demand In other words THIS
is not the case. Choices L imited R esources Supply Or, the study
of how people make choices to get what they want Slide 8 ECONOMICS
- science of scarcity choices - the study of the choices people
make in an effort to satisfy unlimited needs and wantslimited
resources their unlimited needs and wants from limited resources.
Slide 9 Objectives: economics 1. Be able to define economics.
Economics Economics- the study of the choices people make in an
effort to satisfy their unlimited wants from limited resources.
laws 2. What are economic laws. micro & macroeconomics 3.
Differentiate between micro & macroeconomics. Ceteris paribus
4. Ceteris paribus & why it is used[isolating 2 variables]
Positivenormative 5. Positive(descriptive) &
normative(prescribing) econ. Eight econ goals 6. Eight econ goals
(conflict with-FE & PL; complementary- econ growth & FE )
Pitfalls to Clear Economic Thinking 7. Pitfalls to Clear Economic
Thinking such as the fallacy of composition & post hoc fallacy
direct relationship positive sloping curve 8. Explain a direct
relationship (positive sloping curve) inverse 9. Explain and
illustrate an inverse relationship between two variables negative
sloping curve and identify a negative sloping curve. independent
(cause-induces) dependent (effect-responds) 10. Identify
independent (cause-induces) & dependent (effect-responds)
variables. Body weight Ave. miles jogged Body Weight Calories
Consumed What great branches! What a beautiful forest! [set a reese
paar a bus] Slide 10 Food, clothing, shelter, Chrysler 300,
mansion, Nintendo DSI, jewelry, iPod, projector, digital camera,
good health, children, camcorder, laptop warmth, indoor plumbing,
rollerblades, a sense of personal worth, Plasma TV, literacy,
higher economics grade, iPhone 3GS, Flip video, Wii iPad, Motorolas
Xoom Need those first three to survive. Unlimited Human Wants
Limited Resources Land, L abor, C apital, E ntrepreneur R ent, W
ages, I nterest, P rofits Slide 11 Economicsmost discussed
Economics is the academic discipline most discussed by the general
public. least understood [ Language of graphs ] It is also one of
the least understood. [ Language of graphs ] The economists lab is
the real world. They dont conduct controlled laboratory
experiments. They are predicting human behavior. Physicists explore
the physical world. Economics as a social science looks Physicists
explore the physical world. Economics as a social science looks at
the behavior of people in the marketplace. at the behavior of
people in the marketplace. Economics is not an exact science but it
gives likely results. Slide 12 [The economy is the patient
suffering from inflation or unemployment.] [The economy is the
patient suffering from inflation or unemployment.] Diagnosis
Prognosis Treatment Diagnosis Prognosis Treatment Fact & theory
[objective-can be tested] Policy is judgment [subjective-opinion]
Positive Economics Normative Economics Positive Economics Normative
Economics ACL has torn Repair the ACL R ehab brace/crutches Slide
13 When you pick Mr. or Ms. Right, you have 3.5 billion to pick
from. When you pick Mr. or Ms. Right, you have 3.5 billion to pick
from. Were looking for the perfect man. What characteristics are
you not going to want (abstract) in picking Mr. or Ms. Right. There
is the woman I want. She doesnt even have to like sports. Slide 14
Ceteris paribus all else held constant Ceteris paribus [Latin for
all else held constant] is the most everything else being equal.
important assumption in economics. Means everything else being
equal. Models relationship between X and Y Models allow you to
reason about the relationship between X and Y intrusion of Z
without the intrusion of Z. disagreementsquantitative magnitudes
The disagreements occur over the quantitative magnitudes. [Dont tax
peoples savings and they will save more. (how much more)] Economic
Models Economic Models (theories) may be expressed 4 ways. 1.
Verbal statements 2. Pictorially 3. Graphically 4. Mathematical
equations Example: If interest rates were lowered, more houses
would be sold. NO Law of Demand Demand [set a reese paar a bus]
Methodology Methodology [in studying Economic Theory] Slide 15
Economic Growth 1. Economic Growth [Increase in Real GDP or per
capita GDP] 3% 3% annual growth will increase our standard of
living. 1929-Per capita=$ 792$430 2011-per capita= $ 48,000
1929-Per capita=$ 792 ; 1933-Per capita= $430 ; 2011-per capita= $
48,000 Full Employment 95-96 % 2. Full Employment about 95-96 %
employment is full 198210.8% employment. In 1982, unemployment was
10.8% [12 M unempl.] Doing the best with the resources we have.
Economic Efficiency 3. Economic Efficiency resources are scarce so
they must be used wisely. Wasting resources means fewer goods and
services can be produced. Slide 16 . 4. Price Level Stability 4.
Price Level Stability sizable inflation or deflation should be
avoided. We had over 10% in 73, 79, & 80. Inflation 2% in the
1950s, 2.3% in 1960s 7.4% in 80s. was 2% in the 1950s, 2.3% in
1960s and 7.4% in 80s. A person making $25,000 a year at age 30
would need (with average inflation of 5%) $125,000 a year at age 65
to have the same standard of living. 1972 --------82;
1982-------2011 1972 --------82; 1982-------2011 In 1945, $1.50
bought what $1.00 did in 1860. Today, it takes $11 to buy what $1
bought in 1945. It took $2.31 in 1982 to buy what $1 bought in
1972. It took $2.31 in 1982 to buy what $1 bought in 1972. In 2011,
it took $2.37 to buy what $1 bought in 1982. Reasonable inflation,
1-2% is OK. Slide 17 HYPERINFLATION in Brazil [1988-1994] 1988
1,300%1991 1,000% 1989 2,900%1992 1,260% 1990 44%1993 1,740% Prices
in 1994 were 4 million times higher than in 1988. Only $140 million
per pair Why did Brazils Inflation increase so much? Brazils
inflation1988 to 1994 If we had Brazils inflation from 1988 to
1994: $35 Blue jeans $140 million 1. $35 Blue jeans would increase
to $140 million per pair. Gas$2.35$5 2. Gas would increase from
$2.35 to $5 million per gallon. $20 pizzamovie $80 million 3. $20
for a pizza and movie would increase to $80 million. One new
real2,750 of the old reals. 4. One new real was exchanged for 2,750
of the old reals. Slide 18 A n Equitable Distribution of Income 5.
A n Equitable Distribution of Income. One group shouldnt have
extreme luxury while another is in stark poverty. The richest 1%(3
mil.) have as much total income after taxes [average $400,000 a
year as the bottom 40% [100 million people]. The richest 1% have
greater wealth than the bottom 90% of the population. Slide 19
Personal Income (%) 3.4 % 8.6 % 14.5 % 22.9 % 50.5 % Lowest 20%
Income Group 3 % [ only 3 % graduate from college] Second 20%
Income Group 4.6 % [only 4.6 % graduate from college] Middle 20%
Income Group 12 % [only 12 % graduate college ] Fourth 20% Income
Group 25 % [ 25 % graduate from college] 51 % H ighest 20%[ over
$100,000 ] [ 51 % graduate col.] Only 1 in 7 within this group even
works. Income differences are caused by differences in IQ, energy,
health, social skills, character, ambition, physical
attractiveness, talent, and luck. Slide 20 You are free to make
your own economic decisions: Choose your job Choose where and when
you work Work for yourself or someone else Leave your job and to
move to another job Free to buy what we want Businesses are free
to: Choose which workers they want Figure out how much business
they want to do Businesses are free to sell what they want Slide 21
. E conomic Security 7. E conomic Security provision should be made
for those not able to take care of themselves handicapped,
disabled, old age, chronically ill, orphans. Protection from
lay-offs [unemployment insurance]. Also no discrimination. 43
million Americans have some type of disability. A. Hearing
impaired: 22 million (including 2 million deaf) B. Totally blind:
120,000 (Legally blind: 60,000) C. Epileptic: 2 million D.
Paralyzed: 1.2 million D. Paralyzed: 1.2 million E. Developmentally
disabled; 9.2 million F. Speech impaired: 2.1 million G. Mentally
retarded: up to 2.5 million H. HIV infected: 900,000 Social
Security and Medicare provide security for older people. Social
Security and Medicare provide security for older people. Balance of
Trade $400 billion a year complementary economic growthF.E. ]
conflict F.E.price level stability 8. Balance of Trade. O ver $400
billion a year the last few years. Some of these goals are
complementary [ economic growth & F.E. ] and some conflict
[F.E. and price level stability]. Slide 22 Positive Economics
Normative Economics 1. Can 1. Cannot 1. Can be tested1. Cannot be
tested 2. Scientific 2. Value judgment 3. In 3. Ought to be 3. In
the economy3. Ought to be in the economy Positive [Scientific] v.
Normative [ Prescriptive (personal) ] [ describingjust the facts]
v. [ the economist being a policymaker] 1. The economy grew at
3.6%.1. The economy ought to grow more. 2. Unemployment is 9,5%. 2.
Unemployment is too high. Positive economics [ observable, factual,
& testable economic events trade deficit, budget deficit, etc.]
deals with straight facts on economic behavior and doesnt give
opinions or value judgments. It is concerned with what is, was, or
will be. [objective - not influenced by emotions] [Statements that
are verifiable] Straight facts In my opinion Slide 23 Normative E
conomics expresses opinions or value judgments. It is concerned
with what ought to be and uses words like should, needs, and too.
Unemployment ought to be reduced. These opinions cannot be proved
or disproved. We should protect the auto industry from foreign
competition, Normative involves judgments and prescriptions for
preferred courses of action. [ Subjective influenced by emotions ]
Most of the disagreements among economists involve normative
economics. Ideally, value judgments are involved at the policy
level only. Positive Economics Normative Economics 1. In the
economy 1. Ought to be in the economy 2. Scientific 2. Value
judgment 3. Can be tested3. cannot be tested Descriptive analysis
Prescriptive analysis Slide 24 Positive or Normative? Answers: 1. N
2. P 3. N 4. P 5. N 6. N 7. N 1. It is too cold to play football
today. 2. Gross Domestic Product grew 4% last year. 3. The
temperature is too cold today. 4. The temperature is 92 degrees
today. 5. The humidity is too hot. 6. People who are unemployed are
just too lazy to work. 7. Suzie RahRah should be friendlier to me
this time. NOT After turning me down 3 times, Susie RahRah should
be friendlier to me this time. Slide 25 Beautiful, beautiful
forest!. Beautiful leaf! MACROECONOMICS... MICROECONOMICS... Slide
26 Macroeconomics telescope Macroeconomics economics thru a
telescope. whole bowl of macaroni & cheese Ex: Studying whole
bowl of macaroni & cheese. Microeconomics microscope
Microeconomics economics thru a microscope. one macaroni noodle Ex:
Studying one macaroni noodle. Slide 27 Macro economy 1. Macro
[national] economics concerned with the economy as a whole as a
whole or with aggregates like government, business sectors, or
households. Macroeconomics is concerned with an overview of the
economy overview of the economy. forest, not the trees, Macro
examines the forest, not the trees, leaves, or specific pieces of
bark. leaves, or specific pieces of bark. It gives birds-eye view
of the economy. us a birds-eye view of the economy.. Micro specific
2. Micro [details of the big picture] concerned with specific
economic units economic units or individual markets under a
microscope. Emphasis is on individual households, industries, or
firms [like the # of workers employed by Ford] [C oncerns the
components of the economy] trees, leaves, & pieces of bark,
Micro examines the trees, leaves, & pieces of bark, rather than
the forest.worms-eye rather than the forest. It gives a worms-eye
view view of a specific component of our economy. Great Forest!
Beautiful bark! Slide 28 Macro Micro Macro [large ](telescope)
whole economy [economy-wide issues] Micro [ small ]( microscope ]
segment of the economy [issues in the economy]. Production
Production MicroeconomicsMacroeconomics How much steelTotal
industrial output How much office spaceGross Domestic P roduct How
many carsTotal decline during recession Prices Prices Price of
individual goodsAggregate price level Price of medical careConsumer
Price Index Apartment rentsRate of inflation Employment Employment
Jobs in the steel industryTotal number of jobs # of employees in a
firmEconomys unemployment # of doctors/accountants# of discouraged
workers Check out those pieces of bark!. Beautiful, beautiful
forest! Slide 29 I s the f ollowing Micro or Macro ? I s the f
ollowing Micro or Macro ? 1. The price of digital cameras increased
5% last year. 1. The price of digital cameras increased 5% last
year. 2. Unemployment was 5.4% for the U.S. workforce. 2.
Unemployment was 5.4% for the U.S. workforce. 3. Unemployment in
the auto industry was 8% last year. 4. Duck N ational Bank lowered
its interest rates on CDs to 8%. 5. The Consumer Price Index rose
to 2.7% last year. 6. The computer industry laid off 8% of its
workers last year. 7. The price of gasoline rose 25% last year.
What forest, check these branches, limbs, and leaves. Slide 30
Pitfalls To Sound Reasoning [ Chuckholes] Pitfalls To Sound
Reasoning [ Chuckholes] Bias - preconceived beliefsnot warranted by
facts 1. Bias - preconceived beliefs not warranted by facts.
prejudices We tend to accept everything that reinforces our
prejudices. We will not learn economics if we reject things before
we understand them. Try to understand thingsinterferes Try to
understand things first before you reject them. This interferes
with objective analysis with objective analysis. Loaded terminology
emotional terms leading 2. Loaded terminology - use of emotional
terms leading to a nonobjective analysis[corporate profits -
obscene; government to a nonobjective analysis. [corporate profits
- obscene; government regulations - socialists; low wages -
exploitive; flood control - regulations - socialists; low wages -
exploitive; flood control - creeping socialism]. objectivity
creeping socialism]. We must have objectivity. Definitions 3.
Definitions - certain economic terms have different meanings than
normal. Utility satisfaction A. Utility means satisfaction.
Investment B. Investment means purchase of machinery, tools and
factories machinery, tools and factories. Price ceilingsbelow
equilibrium C. Price ceilings are below equilibrium. Price
floorsabove equilibrium D. Price floors are above equilibrium.
Slide 31 [combining parts into a whole] [combining parts into a
whole] true for the individual/part true for the group/whole.
generalizing from the particular to the general. What is true for
the individual/part is necessarily true for the group/whole. This
is an error of generalizing from the particular to the general. A.
The safest way for an individual leave a burning theater to leave a
burning theater run for the nearest exit is to run for the nearest
exit. Tariffs B. Tariffs are good for specific industries but not
individuals. Too much money C. Too much money is good for you but
not for everyone. stand up to see better D. You stand up to see
better. Ill stand up so I can see better. Slide 32 Fallacy of
Composition Example: Texas & 7 other states benefithurts the 42
others Fallacy of Composition Example: When the price of oil goes
up, Texas & 7 other states benefit, but it hurts the 42 others.
Helped Hurt CO WY NM TX AK ND OK LA Slide 33 . Post hoc it happened
after thisergo therefore Post hoc [it happened after this], ergo
[therefore] propter hoc because of this propter hoc [ because of
this ]. This fallacy is saying event A precedes event B, A is
because event A precedes event B, A is necessarily the cause of B.
necessarily the cause of B. It is a fallacy that association or
happenstance is causation. P ost H oc F allacy 5. P ost H oc F
allacy happenstance or or coincidence is not causality or
coincidence is not causality. Ex: Ex: Last night I turned the TV on
and the Heat were beating the Mavericks 47-40. They ended up losing
the game 105-95, as the Mavs took the NBA Championship. Turning the
TV on caused the Heat Lebron to lose. And now we know why Lebron
James didnt go to college. He cant pass his finals. Slide 34
Correlation v. Causation two events 6. Correlation v. Causation
because two events occur together [correlation], one event has
caused the other. occur together [correlation], one event has
caused the other. Ex 1: Super Bowl Indicator: The argument says
that Ex 1: Super Bowl Indicator: The argument says that if the NFC
rep or an original NFL t eam win the Super Bowl, if the NFC rep or
an original NFL t eam win the Super Bowl, the stock market goes up.
It has the stock market goes up. It has been right over 80 % of the
time. been right over 80 % of the time. HelloWallStreet Ex 2:
Hemline Indicator: The higher the skirts, the higher the market [
Wall Street would welcome the return of hot pants] In the roaring
20s, short Flapper dresses were the rage. The longer styles of the
1930s heralded a bear market of 90%. Rising stocks in the 60s
coincided with the rise of the micro-mini, only to give way in the
70 s to more conservative dress lengths and a bear market. Even
Charlies Angels wore their skirts long. During the booming 80s,
womens business suits had broad shoulders & tiny skirts. During
the 90s bull market, skirts got short again, this time with slits.
Wall Street will love this. Slide 35 Subjectivity - personal
perception. econ gurus objectively subjectively As we become econ
gurus we must look at economic issues objectively - not
subjectively. Slide 36 bird Is this a leftward-looking bird?
anteloperabbit rightward-looking antelope ? Or a rabbit ? Slide 37
Do You Change Your Mind? Slide 38 Do You Change Your Mind Again?
Slide 39 Do you see an old lady or young girl ? Do you see an old
lady or young girl ? The old womans nose is the young girls chin
Hint: The old womans nose is the young girls chin. Slide 40 Slide
41 Optical Illusion. Stare at the picture & see if it doesnt
look like you are looking at a giraffe - and yet there is really no
giraffe. Oh! Slide 42 . YELLOWBLUEO RANGE YELLOWBLUEO RANGE
BLACKREDGREEN BLACKREDGREEN PURPLEY ELLOW RED PURPLEY ELLOW RED
ORANGE GREENBLACK ORANGE GREENBLACK BLUERED PURPLE BLUERED PURPLE
GREENBLUEO RANGE GREENBLUEO RANGE Left-Right Conflict Left-Right
Conflict Your right brain tries to say the color but Your right
brain tries to say the color but your left brain insists on reading
the word. your left brain insists on reading the word. COLOR, Look
at the Chart and say the COLOR, not the word. Slide 43 Slide 44 Are
These items Moving? Or Are They Perfectly Still? The pictures are
used to test the level of stress a person can handle. Alleged
criminalsspinning around madly senior citizensstanding still T he
slower the pictures move, the better your ability of handling
stress. Alleged criminals that were tested see them spinning around
madly; however, senior citizens and kids see them standing still.
None of these images are animated - they are perfectly still. Slide
45 Focus on the Dot in the center & move your head backward and
forwards. Slide 46 green one 3. Look at the cross a bit longer and
youll notice that all dots except the green one will disappear.
pink dot green 2. Concentrate on the cross in the middle, after a
while you will notice that this moving pink dot will turn green !
pink dot 1. Follow the moving pink dot & notice it doesnt
change color. Slide 47 Rotating Snakes Rotating Snakes Concentrate
on the dot in the middle of the picture. If you see any rotation in
the others, you are going to be a criminal. Slide 48 Is this a Frog
or a Horse? Slide 49 The Day You Get Married Slide 50 20 Years
Later Slide 51 Arnold Before Ill be back. Arnold After Oh!! My back
Get out and dont come back! Maria Slide 52 Economics is a little
like optical illusions. Some times the economic concepts presented
are easy to see & understand. Other times the concepts
presented take more time to reveal themselves. appears Just like
the illusions, you must be persistent and not give up until the
concept appears to you. econ guru Then and only then will you
become an econ guru, and look like one of these! Econ Gurus So,
this is your goal, look like one of these! Slide 53 INCOME (per
week) $ 0 100200300400 $ 50 100150200250CONSUMPTION (per week)
Table of Values Construction of Econ Graphs Slide 54 INCOME (per
week) $ 0 100200300400 $ 50 100150200250CONSUMPTION (per week)
Table of Values Construction of Econ Graphs CONSUMPTION (C) $400
300 200 100 Vertical Axis Slide 55 INCOME (per week) $ 0
100200300400 $ 50 100150200250CONSUMPTION (per week) Table of
Values Construction of Econ Graphs CONSUMPTION (C) 0 100 200 300
400 0 100 200 300 400 INCOME (Y) $400 300 300 200 200 100 100
Vertical Axis Horizontal Axis Slide 56 INCOME (per week) $ 0
100200300400 $ 50 100150200250CONSUMPTION (per week) Exists Between
Consumption & Income CONSUMPTION (C) 0 100 200 300 400 0 100
200 300 400 INCOME (Y) $400 300 300 200 200 100 100 a bcd e a b c
de A Direct Relationship... C 150 250 Slide 57 Direct ( positive )
Relationship Direct ( positive ) Relationship Independent variable
induces (cause); Dependent variable responds (effect) Direct 2
variables move in same direction. Econ, Econ Econ Slide 58
TICKETPRICE $50 40 403020100048121620ATTENDANCE(thousands) Inverse
( Negative ) Relationship Inverse - 2 variables move in opposite
directions TICKET PRICE (P) 0 4 8 12 16 20 0 4 8 12 16 20
ATTENDANCE IN THOUSANDS (Q) $50 40 40 30 30 20 20 10 10 a b c d e a
b c f e f d I n Economics the independent variable can be on either
axis. Slide 59 Price of Bananas Purchases of Watches Consumption
Divorce Rate Slope = Infinite Slope = Zero Increasing X has no
effect on Y. Y X X Y Increasing Y has no effect on X. INFINITE and
ZERO Slopes Slide 60 Tell everything you know about each topic. You
have only 6 seconds on each topic. Slide 61 Economics 1. Economics
________________________________________ Needs 2. Needs include
food, clothing, and (shelter/good grades in economics/ a date most
Saturday nights). Theories and generalizations 3. Theories and
generalizations (are/are not) the same thing. Abstraction 4.
Abstraction focusing on (two/three/four) variables to explain an
event. favorable balance of trade 5. The goal of a favorable
balance of trade (has/has not) been met in recent years. Economic
theories 6. Economic theories are (specifics/generalizations) based
upon observing all the facts. They are called laws, principles,
generalizations or models. Economic laws 7. Economic laws that lead
to policy are not true in every situation, but they are (useful/not
useful) because they allow us to predict & therefore (control
or adjust to events/not control or adjust to events). 8. Economic
models (abstract/leave in) the complexities of the real world.
Ceteris paribus 9. Ceteris paribusother things being ________, that
is all variables are constant except ___. Ceteris paribus model 10.
Ceteris paribus model allows us to reason about the relation- ship
between variables __ & __ without the intrusion of variable __.
NS 1-10 constant 2 X Y Z The study of the choices people make in an
effort to satisfy their unlimited needs and wants from scarce
resources. their unlimited needs and wants from scarce resources.
Slide 62 hot to jog today./ The temperature is 88 degrees today.)
value judgments 15. Ideally, value judgments are involved at the
(level of policy only/ level of facts only). hypothesis 11. A
hypothesis is a tentative, (tested/untested) principle.
hypothesispasses the testbecomes economic theory [If the hypothesis
passes the test, it becomes economic theory.] positive statement
12. A positive statement is concerned with (what is/what ought to
be). They collect and present facts. normative statement 13. A
normative statement is based upon (facts/value judgments). These
statements are concerned with what the economy should be like or
which policies are best. 14. An example of a normative statement
would be (It is too disagreements among economists 16. Most of the
disagreements among economists involve (positive/normative)
statements as regards economic (policy/facts). Microeconomics 17.
Microeconomics is concerned with (specific economic units/the
entire economy). macroeconomics 18. Which of the following is
associated with macroeconomics ? (an examination of the incomes of
Richland Duck graduates/ unemployment in the civilian labor force).
microeconomic statement 19. Which of the following is a
microeconomic statement ? (GDP decreased by 1% last year/Auto
prices declined this year). Full employment conflicts 20. Full
employment conflicts with the economic goal of (economic
growth/price stability). Full employment is complementary 21. Full
employment is complementary with the goal of (economic security/
price stability). NS 11-21 Slide 63 NS 22-23 Bias 22. Bias
preconceptions that (are/are not) based on facts. Loaded
terminology 23. Loaded terminology (emotional/non-emotional) terms
leading to a nonobjective analysis. Definitions 24. Definitions
economic words have different meanings. Examples: Utility A.
Utility means (extra/satisfaction) Investment B. Investment means
(money/tools, machinery, & factories) Price floors price
ceilings C. Price floors are (above/below) price ceilings Slide 64
fallacy of composition 25. The fallacy of composition states that
what is true for the (individual/group) must necessarily be true
for the (individual/group). Cowboys won the Super Bowl stock market
should 26. The Cowboys won the Super Bowl so the stock market
should rise rise is an example of the (post hoc/correlation v.
causation) fallacy. Cause & effectafter this, because of this
fallacy 27. [Cause & effect] The after this, because of this
fallacy states that because event A precedes event B, ___ is
necessarily the cause of ___. If you leave a football game at the
end of the 3 rd quarter, you will avoid 28. If you leave a football
game at the end of the 3 rd quarter, you will avoid traffic &
get home more quickly.Therefore, everyone should leave the traffic
& get home more quickly. Therefore, everyone should leave the
game early. game early. This is an example of the (post hoc
fallacy/fallacy of composition). post hoc fallacy 29. A n example
of the post hoc fallacy is (I turned the game on & the Mavs
lead but lost the game/My grade in econ has improved because Ive
studied more.) NS 25-29 Ill lean over & maybe I can see better.
A B Slide 65 inversely 30. Which graph shows the amount of Y
inversely related to the amount of X? ____ 31. In which graph above
is the amount of Y (constant at $10) unrelated unrelated to the
increasing amount of X? ___ directly 32.In which graph above is the
amount of Y directly related to the amount of X? ___ Zero slope
Infinite slope Zero slope and an Infinite slopeC B A Direct
InverseInverse A B C D Slide 66 The End
