ch01-introduction.ppt

1、1INTRODUCTIONECONOMIC MODELS2Theoretical ModelsEconomists use models to describe economic activitiesWhile most economic models are abstractions from reality,they provide aid in understanding economic behavior3Verification of Economic ModelsThere are two general methods used to verify economic models

2、:direct approachestablishes the validity of the models assumptionsindirect approachshows that the model correctly predicts real-world events4Verification of Economic ModelsWe can use the profit-maximization model to examine these approachesis the basic assumption valid?do firms really seek to maximi

3、ze profits?can the model predict the behavior of real-world firms?5Features of Economic ModelsCeteris Paribus assumptionOptimization assumptionDistinction between positive and normative analysis6Ceteris Paribus AssumptionCeteris Paribus means“other things the same”（如果其他条件不变）Economic models attempt t

4、o explain simple relationshipsfocus on the effects of only a few forces at a timeother variables are assumed to be unchanged during the period of study7Optimization AssumptionsMany economic models begin with the assumption that economic actors are rationally pursuing some goalconsumers seek to maxim

5、ize their utilityfirms seek to maximize profits(or minimize costs)government regulators seek to maximize public welfare8Optimization AssumptionsOptimization assumptions generate precise,solvable modelsOptimization models appear to be perform fairly well in explaining reality9Positive-Normative Disti

6、nctionPositive economic theories seek to explain the economic phenomena that is observedNormative economic theories focus on what“should”be done10The Economic Theory of ValueEarly Economic Thought“value”was considered to be synonymous with“importance”since prices were determined by humans,it was pos

7、sible for the price of an item to differ from its valueprices value were judged to be“unjust”11The Economic Theory of ValueThe Founding of Modern Economicsthe publication of Adam Smiths The Wealth of Nations is considered the beginning of modern economicsdistinguishing between“value”and“price”contin

8、ued(illustrated by the diamond-water paradox)the value of an item meant its“value in use”the price of an item meant its“value in exchange”12The Economic Theory of ValueLabor Theory of Exchange Valuethe exchange values of goods are determined by what it costs to produce themthese costs of production

9、were primarily affected by labor coststherefore,the exchange values of goods were determined by the quantities of labor used to produce themproducing diamonds requires more labor than producing water13The Economic Theory of ValueThe Marginalist Revolutionthe exchange value of an item is not determin

10、ed by the total usefulness of the item,but rather the usefulness of the last unit consumedbecause water is plentiful,consuming an additional unit has a relatively low value to individuals14The Economic Theory of ValueMarshallian Supply-Demand SynthesisAlfred Marshall showed that supply and demand si

11、multaneously operate to determine priceprices reflect both the marginal evaluation that consumers place on goods and the marginal costs of producing the goodswater has a low marginal value and a low marginal cost of production Low pricediamonds have a high marginal value and a high marginal cost of

12、production High price15Supply-Demand EquilibriumQuantity per periodPriceP*Q*DThe demand curve has a negative slope because the marginal value falls as quantity increasesSThe supply curve has a positive slope because marginal costrises as quantity increasesEquilibriumQD=Qs16General Equilibrium Models

13、the Marshallian model is a partial equilibrium modelfocuses only on one market at a timeto answer more general questions,we need a model of the entire economyneed to include the interrelationships between markets and economic agentsThe Economic Theory of Value17The production possibilities frontier

14、can be used as a basic building block for general equilibrium modelsA production possibilities frontier shows the combinations of two outputs that can be produced with an economys resourcesThe Economic Theory of Value18The production possibility frontier reminds us that resources are scarceScarcity

15、means that we must make choiceseach choice has opportunity coststhe opportunity costs depend on how much of each good is producedA Production Possibility Frontier19Welfare Economicstools used in general equilibrium analysis have been used for normative analysis concerning the desirability of various

16、 economic outcomeseconomists Francis Edgeworth and Vilfredo Pareto helped to provide a precise definition of economic efficiency and demonstrated the conditions under which markets can attain that goalThe Economic Theory of Value20Modern ToolsClarification of the basic behavioral assumptions about individual and firm behaviorCreation of new tools to study marketsIncorporation of uncertainty and imperfect information into economic modelsIncreasing use of computers to analyze data21Important Point