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Day 2 - Economic Issues and Concepts.odt

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Queen's University
ECON 110
Ian James Cromb

Chapter 1: Economic Issues and Concepts What is Economics? Simplest definition is that economics is the study of how the material needs and wants of a society are satisfied. Any economic system must satisfy 3 basic questions: 1. What is produced? 2. How is it produced? 3. Who consumes the goods and services produced. Scarcity, Choice and Opportunity Cost The fundamental economic problem stems from 2 basic facts and their implications 1. Society has virtually limitless needs and wants in terms of goods and services. • Distinction is blurry between needs and wants • Not really important 2. Limited resources with which to satisfy these material needs and wants. • Natural resources • Productive capital (production machines) • Time Unlimited needs and wants, limited resources to satisfy those. Scarcity • Everyone can't have everything they need/want Choices • Inevitable • Choice of production • Choice of means of production Opportunity Cost • Next best thing forgone alternative • Measure of scarcity Opportunity Cost • Most important concept in economics. Everyday examples: 1. $600 and decide to buy an iPhone • opportunity cost of iPhone? Next best thing you could have done with the $600. 2. Decide to watch 'Suits'
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