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1
Preliminaries
Prepared by:
Fernando & Yvonn
Quijano
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Microeconomics Pindyck/Rubinfeld, 7e.
CHAPTER 1 OUTLINE
1.1 The Themes of Microeconomics
1.2 What Is a Market?
1.3 Real versus Nominal Prices
Chapter 1: Preliminaries
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Microeconomics Pindyck/Rubinfeld, 7e.
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Preliminaries
Chapter 1: Preliminaries
Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Microeconomics Pindyck/Rubinfeld, 7e.
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1.1
Trade Offs
Consumers
Consumers have limited incomes, which can be spent on a
wide variety of goods and services, or saved for the future.
Chapter 1: Preliminaries
Workers
Workers also face constraints and make trade-offs. First,
people must decide whether and when to enter the
workforce. Second, workers face trade-offs in their choice of
employment. Finally, workers must sometimes decide how
many hours per week they wish to work, thereby trading off
labor for leisure.
Firms
Firms also face limits in terms of the kinds of products that
they can produce, and the resources available to produce
them.
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1.1
Chapter 1: Preliminaries
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1.1
Chapter 1: Preliminaries
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1.2
WHAT IS A MARKET?
Chapter 1: Preliminaries
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1.2
WHAT IS A MARKET?
Chapter 1: Preliminaries
market price
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1.2
WHAT IS A MARKET?
Chapter 1: Preliminaries
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1.2
WHAT IS A MARKET?
Chapter 1: Preliminaries
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1.2
WHAT IS A MARKET?
Chapter 1: Preliminaries
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1.3
nominal price
inflation.
Chapter 1: Preliminaries
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1.3
1980
1990
2000
2007
38.8
82.4
130.7
172.2
205.8
$0.61
$0.84
$1.01
$0.91
$1.64
College education
$2530
$4912
$12,018
$20,186
$27,560
$0.61
$0.40
$0.30
$0.21
$0.31
College education
$2,530
$2,313
$3,568
$4,548
$5,196
Chapter 1: Preliminaries
CPI1970
38.8
nominal price in 1980
$0.84 $0.40
CPI1980
82.4
38.8
CPI1970
$1.01 $0.30
nominal price in 1990
130.7
CPI1990
While the nominal price of eggs rose during these years, the real price of eggs actually fell.
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1.3
1980
1990
2000
2007
38.8
82.4
130.7
172.2
205.8
$0.61
$0.84
$1.01
$0.91
$1.64
College education
$2530
$4912
$12,018
$20,186
$27,560
$2.05
$1.33
$1.01
$0.69
$1.04
Chapter 1: Preliminaries
CPI1990
130.7
nominal price in 1970
$0.61 $2.05
CPI1970
38.8
CPI1990
130.7
nominal price in 2007
$1.64 $1.04
CPI 2007
205.8
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1.3
1980
1990
2000
2007
38.8
82.4
130.7
172.2
205.8
$0.61
$0.84
$1.01
$0.91
$1.64
College education
$2530
$4912
$12,018
$20,186
$27,560
$2.05
$1.33
$1.01
$0.69
$1.04
Chapter 1: Preliminaries
0.49
real price in 1970
2.05
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1.3
Figure 1.1
Chapter 1: Preliminaries
In nominal terms,
the minimum wage
has increased
steadily over the
past 70 years.
However, in real
terms its expected
2010 level is below
that of the 1970s.
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1.4
Chapter 1: Preliminaries
First, Ford had to think carefully about how the public would
react to the design and performance of its new products.
Next, Ford had to be concerned with the cost of
manufacturing these cars.
Finally, Ford had to think about its relationship to the
government and the effects of regulatory policies.
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1.4
Chapter 1: Preliminaries
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