Instructor Manual: Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
Instructor Manual
Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
TABLE OF CONTENTS
Purpose and Perspective of the Chapter......................................................................1
Chapter Objectives........................................................................................................1
Complete List of Chapter Activities and Assessments.................................................2
Key Terms.....................................................................................................................2
What's New in This Chapter........................................................................................4
Chapter Outline.............................................................................................................4
Additional Discussion Questions..................................................................................7
Additional Resources....................................................................................................8
Cengage Video Resources.........................................................................................................................8
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.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
1.1 Explain the difference between a good and a bad.
1.2 Explain how choices, opportunity cost, and the need for a rationing device arise from scarcity.
1.3 Define and provide an example of making decisions “at the margin.”
1.4 Provide a numerical example that illustrates efficiency.
1.5 Give an example of how an incentive can motivate behavior.
1.6 Explain how exchange (trade) can increase utility for the individuals involved.
1.7 Explain how and why economists use the ceteris paribus assumption.
1.8 Distinguish between positive and normative economics.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 1
publicly accessible website, in whole or in part.
, Instructor Manual: Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
COMPLETE LIST OF CHAPTER ACTIVITIES AND
ASSESSMENTS
The following table organizes activities and assessments by objective, so that you can see how all this
content relates to objectives and make decisions about which content you would like to emphasize in your
class based on your objectives. For additional guidance, refer to the Teaching Online Guide.
Chapter Activity/Assessment PPT Slide Number Duration
Objective
1.2 Knowledge Check 1a 12 1 minute
1.2 Knowledge Check 1b 13 1 minute
1.2 Knowledge Check 1c 14 1 minute
1.3 Knowledge Check 2a 23 1 minute
1.4 Knowledge Check 2b 24 1 minute
1.3 Knowledge Check 2c 25 1 minute
1.7 Knowledge Check 3a 32 1 minute
1.7 Knowledge Check 3b 33 1 minute
1.8 Knowledge Check 3c 34 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.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 2
publicly accessible website, in whole or in part.
, Instructor Manual: Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
Labor: The work brought about by the physical and mental talents that people contribute
to the production process.
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 /∆Q.
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:
Feature Learning Objectives added to the beginning of the chapter
New Economics 24/7 Feature: A Way to Make the Invisible Visible: Say “No Free Lunch”
New Economics 24/7 Feature: Exchange, The Code of Hammurabi, and Smart Contracts
[return to top]
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in PowerPoints or
other supplements) and assessments by chapter (and therefore by topic), so that you can see how all the
content relates to the topics covered in the text.
I. Your Life, 2028-2034 (01.02, PPT Slide 5-6)
a. The answers to many of life’s questions have to do with economics
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 3
publicly accessible website, in whole or in part.
, Instructor Manual: Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
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 2028”,
etc. A Definition of Economics (01.01, PPT 6-10)
II. A Definition of Economics (01.02, PPT Slide 7-14)
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
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 (01.03, 01.04, 01.05, PPT 15-25)
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
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.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 4
publicly accessible website, in whole or in part.
Instructor Manual
Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
TABLE OF CONTENTS
Purpose and Perspective of the Chapter......................................................................1
Chapter Objectives........................................................................................................1
Complete List of Chapter Activities and Assessments.................................................2
Key Terms.....................................................................................................................2
What's New in This Chapter........................................................................................4
Chapter Outline.............................................................................................................4
Additional Discussion Questions..................................................................................7
Additional Resources....................................................................................................8
Cengage Video Resources.........................................................................................................................8
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.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
1.1 Explain the difference between a good and a bad.
1.2 Explain how choices, opportunity cost, and the need for a rationing device arise from scarcity.
1.3 Define and provide an example of making decisions “at the margin.”
1.4 Provide a numerical example that illustrates efficiency.
1.5 Give an example of how an incentive can motivate behavior.
1.6 Explain how exchange (trade) can increase utility for the individuals involved.
1.7 Explain how and why economists use the ceteris paribus assumption.
1.8 Distinguish between positive and normative economics.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 1
publicly accessible website, in whole or in part.
, Instructor Manual: Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
COMPLETE LIST OF CHAPTER ACTIVITIES AND
ASSESSMENTS
The following table organizes activities and assessments by objective, so that you can see how all this
content relates to objectives and make decisions about which content you would like to emphasize in your
class based on your objectives. For additional guidance, refer to the Teaching Online Guide.
Chapter Activity/Assessment PPT Slide Number Duration
Objective
1.2 Knowledge Check 1a 12 1 minute
1.2 Knowledge Check 1b 13 1 minute
1.2 Knowledge Check 1c 14 1 minute
1.3 Knowledge Check 2a 23 1 minute
1.4 Knowledge Check 2b 24 1 minute
1.3 Knowledge Check 2c 25 1 minute
1.7 Knowledge Check 3a 32 1 minute
1.7 Knowledge Check 3b 33 1 minute
1.8 Knowledge Check 3c 34 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.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 2
publicly accessible website, in whole or in part.
, Instructor Manual: Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
Labor: The work brought about by the physical and mental talents that people contribute
to the production process.
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 /∆Q.
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:
Feature Learning Objectives added to the beginning of the chapter
New Economics 24/7 Feature: A Way to Make the Invisible Visible: Say “No Free Lunch”
New Economics 24/7 Feature: Exchange, The Code of Hammurabi, and Smart Contracts
[return to top]
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in PowerPoints or
other supplements) and assessments by chapter (and therefore by topic), so that you can see how all the
content relates to the topics covered in the text.
I. Your Life, 2028-2034 (01.02, PPT Slide 5-6)
a. The answers to many of life’s questions have to do with economics
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 3
publicly accessible website, in whole or in part.
, Instructor Manual: Arnold, Economics, 2027, 9798214054599; Chapter 1: What Economics is About
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 2028”,
etc. A Definition of Economics (01.01, PPT 6-10)
II. A Definition of Economics (01.02, PPT Slide 7-14)
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
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 (01.03, 01.04, 01.05, PPT 15-25)
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
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.
© 2027 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 4
publicly accessible website, in whole or in part.
