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Economics Text Chapter 1
Transcript of Economics Text Chapter 1
What is Economics?
Definition of Economics
In other words, economics is the study of choice under constraints
What type of choices do we make?
Why must we make choices?
needs vs. wants
"All of the goods and services we produce are scarce.
Scarcity implies limited quantities of resources to meet unlimited wants.
All decisions that businesses and individuals make involve
are all the alternatives we give up whenever we choose one course of action over another." (8)
"Economics is the study of how people seek to satisfy their needs and wants by making choices." (3)
Scarcity is not the same as a shortage
shortages are temporary or long-term
a store can be out of an item for a few days
a war creates shortages
scarcity always exists
"our needs and wants are always greater than our resource supply" (4)
Goods and services are scarce because they come from scarce resources
All natural resources used to produce G and S
The effort a person puts in for which he/she is paid
(a.k.a. Capital Goods)
any human-made resource that is used to produce other G and S
=knowledge (education) and skills (experience)
Resources = Factors of Production
Businesses and Trade-offs
"The decisions businesspeople make about how to use land, labor, and capital resources create trade-offs" (8)
Society and Trade-offs
"Countries also make decisions that involve trade-offs" (8)
Guns (military goods) vs. Butter (consumer goods)
If individuals, businesses, or governments make a decision, there are trade-offs to the decision.
"The most desirable alternative given up as a result of the decision is called the opportunity cost." (9)
Examples from the text:
buying a computer vs. going on a trip
growing broccoli vs. cauliflower
Guns vs. Butter
Opportunity Cost (cont.)
Every decision we make has an opportunity cost
Sleep late or wake up early to eat breakfast?
Sleep late or wake up early to study for a test?
Sleep late or wake up early for a ski trip?
Thinking at the margin: we don't always make "all or nothing" decisions