Discuss the continuity of the following functions. Find the largest region in the xy-plane in which the following functions are continuous.
f (x, y) = ln(x + y)
Chapter 1: Principles of Economics What is economics Economics is the study of how society manages its scarce resources. How do we use graphs in economics We graphs to illustrate the relationship between variables. The following illustrates the negative relationship between price and quantity. As the price decreases the quantity increases – this is a negative relationship because the quantity slope is negative. Economics • Scarcity of resources (income, time, natural resources) ◦ Unlimited wants and desires ◦ Choices • Social Science of individuals choice behaviour, given you have scarce resources. Three Economic Ideas (Assumptions that we make) 1. People are rational – they use information to make a rational choice. 2. People respond to incentives, 3. Optional decisions are made at margin (one additional unit). Four Principles of Individual Decision Making 1. People face trade-offs. 2. Opportunity Cost (something that you give up to gain something). 3. Rational people think at the margin. 4. People respond to incentives. How People Interact 1. Trade can make everyone better off. • Specialization 2. Market (Buyer and Seller) – the exchange of goods and services. • Invisible Hand 3. Government Role • Property Rights • Prevents Market Failure • To avoid externality How does the Economy Works (a) Standard of Living • Depends on its ability to produce goods and services • Gross Domestic Product (