Chapter 1: Two Basic Economic Models Purpose and Organization of the Chapter This chapter provides an introduction to the book by showing why economists use simplified models. The chapter begins with a few definitions of economics and then turns to a discussion of such models. Development of Marshall's analysis of supply and demand is the main example used here, and this provides a review for students of what they learned in introductory economics. The notion of how shifts in supply or demand curves affect equilibrium prices is highlighted. The chapter also reminds students of the production possibility frontier concept and shows how it illustrates opportunity costs. The chapter concludes with a discussion of how economic models might be verified. A brief description of the distinction between positive and normative analysis is also presented. Lecture and Discussion Suggestions We have found that a useful way to start the course is with one (or perhaps two) lectures on the historical development of microeconomics together with some current examples. For example, many students find economic applications to the natural world fascinating and some of the economics behind Application 1.1, might be examined. Application 1.6: Economic Confusion provides normative distinction and to tell a few economic jokes (if your supply of such jokes is running low – see Additional Resources). In terms of explicit content, some time should be spent on reminding students about how supply and demand curves work since these concepts underlie most of microeconomics. Especially important is to make sure that students understand that these curves show firms’ and consumers’ reactions to all possible prices. That is, the independent variable is on the vertical axis. Far more on the problems raised by this approach is provided in Chapter 2. Cengage Supplements The following product-level supplements provide additional information that may help you in preparing your course. They are available in the Instructor Resource Center.  Test Bank  PowerPoint slides Chapter Objectives The following objectives are addressed in this chapter: