Chapter 3 introduces markets and provides an overview of the supply and demand model. It begins by comparing central planning and the market as alternative methods of allocating resources Chapter 3-Supply and Demand: An Introduction Slide 3

Multiple Choice If one person can perform a task in fewer hours than another, you know the person has in performing the task. a. an absolute advantage. b. a comparative advantage. C. both a comparative advantage and an absolute advantage. rd. neither an absolute nor a comparativ advantage

An individual has a comparative advantage in the production of a particular good if she can produce it at a lower opportunity cost than other individuals. An individual has an absolute advantage in the production of a good if she can produce more of that good than another individual. using comparable amounts of time. raw materials and effort

Answers to Review Questions 1. Your friend probably means that your tennis game will improve faster if you take solo private lessons instead of group lessons. But private lessons are also more costly than group lessons. So those people who don' t care that much about ho rapidly they improve may do better to take group lessons and spend what they save on other things

According to Say's Law, Supply Creates Its Own Demand as Prices move to balance Demand with Aggregate Supply

Increases Affect Aggregate Supply?OSt How Do Growth in Potential Output and Ce

ECNOMICS Openness of Different Economies, 1997

ECNOMICS Economic Growth Is Key to Long- Term Living Standards

ECENOMIC S We Now Turn to Money: Its Demand and the Role of Banks in Its Supply

ECENOMIC S Business fluctuations have been a Persistent Feature of Capitalism