Fundamentals of Economics. Доловова Н.Н - 58 стр.

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58
58
Fill in the gaps using the words given
(comprehend, data, vertical axis, measure, hypothetical, independent variable,
diameter, illustrate, consumption, direct relationship)
1. Economists often use graphs to _____ their models, and by understanding
these "pictures" students can more readily _____ what economists are saying.
2. Table 1 provides us with a simple _____ illustration which shows the relationship
between income and _____.
3. What we are doing is representing the _____ on the horizontal axis and the
dependent variable on the _____.
4. By a positive or _____ we mean that the two variables—in this case con-
sumption and income—change in the same direc tion.
5. When two sets of _____ are positively or directly related, they will always graph
as an up-sloping line.
6. A square with sides that _____ 10 cm. has an area of 100 sq. cm.
7. This circle has a _____ of two inches.
LESSON 14
The Foundation of Economics (I)
Two fundamental facts provide a foundation for the field of economics and, in
fact, comprise the economizing problem. It is imperative that we carefully state and
fully understand these two facts, because everything that follows in our study of eco-
nomics depends directly or indirectly upon them. The first fact is this: Society's
material wants, that is, the material wants of its citizens and institutions are virtually
unlimited or insatiable. Second: Economic resources—the means of producing goods
and services—are limited or scarce.
Unlimited wants
Let us systematically examine and explain these two facts in the order stated.
In the first statement, precisely what do we mean by "material wants"? We mean,
first, the desires of consumers to obtain and use various goods and services which
provide utility, the economist's term for pleasure or satisfaction. (This definition
leaves a variety of wants—recognition, status, love, and so forth—for the other social
sciences to worry about.) An amazingly wide range of products fills the bill in this
respect: houses, automobiles, toothpaste, compact-disc players, pizzas, sweaters, and
the like. In short, innumerable products which we sometimes classify as necessities
(food, shelter, clothing) and luxuries (perfumes, yachts, mink coats) are all capable of
satisfying human wants. Needless to say, what is a luxury to Smith may be a

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