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
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)
Unlimited needs and wants, limited resources to satisfy those.
• Everyone can't have everything they need/want
• Choice of production
• Choice of means of production
• Next best thing forgone alternative
• Measure of scarcity
• Most important concept in economics.
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'