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consequences may result in failure to achieve the desired outcome or may result in an
additional, unintended outcome
Example 20: Imagine that new federal regulations require all automobiles and drivers to be as
well-equipped with safety devices as NASCAR racers. The desired outcome is to reduce auto
fatalities and the new regulations would almost certainly reduce auto fatalities. But what would
happen to the number of auto accidents and to the number of pedestrian fatalities?
Macroeconomics versus Microeconomics
Macroeconomics is the branch of economics that focuses on overall economic behavior.
Inflation, unemployment, economic growth, budget deficits, and trade deficits are examples of
macroeconomic concerns.
Microeconomics is the branch of economics that focuses on components of the economy.
Households, firms, particular markets, and specific industries are examples of microeconomic
concerns.
Example 21: The unemployment rate for the overall economy is a macroeconomic concern. The
effect of a new collective bargaining agreement on the unemployment rate in the airline industry
is a microeconomic concern.
Graphs
In the study of economics, we are often interested in the relationship between two variables. If the
value of one variable changes, what will happen to the value of the other variable? If the price of
donuts increases, what will happen to the quantity of donuts demanded? Graphs illustrate the
relationship between two variables.
A graph consists of a pair of intersecting number lines. The number lines intersect at zero on
each number line. The horizontal number line is called the X axis. The vertical number line is
called the Y axis.
Example 22: On a graph, the X axis and the Y axis intersect at zero on each axis.
Y
3-
2-
1-
0
-3 -2 -1 0 1 2 3
-1 -
-2 -
-3 -
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
X
1 - 7 Scarcity and Choices