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York University
ECON 1000

Chapter 1 – What is Economics? Scarcity – the inability to satisfy all our wants Since we face scarcity we must choose between the choices we have Incentive – a reward that encourages an action or a penalty that discourages one Economics – the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices  Microeconomics – the study of the choices individuals and businesses make, the way these choices interact in markets, and the influence of governments  Macroeconomics – the study of the performance of the national economy and the global economy Goods and services – the objects that people value and produce to satisfy human wants  Goods – physical objects  Services – tasks performed for people What? – what is produced changes over time How? – produced by using productive resources “factors of production”  Land “the gift of nature” – what we use to produce goods and services the natural resources ; land itself, minerals, oil, gas, coal, water, air, forests, and fish  Labour – the work time and work effort that people devote to producing goods and services (includes physical and mental efforts) o The quality of labour depends on human capital – the knowledge and skill the people obtain from education, on-the-job training, and the work experience  Capital – the tools, instruments, machines, buildings, and other construction that businesses use to produce goods and services o Financial capital such as money, bonds, and stocks enable businesses to gain funds to buy capital but are not considered capital since they are not a productive resource  Entrepreneurship – the human resource that organizes land, capital, and labour o They come up with new ideas about what and how to produce, make business decisions, and bear the risks that arise from these decisions For Whom? – who consumes the goods and services that are produced depends on incomes that people earn. They earn income by selling factors or production they own  Land earns rent  Labour earns wages  Capital earns interest  Entrepreneurship earns profit Self-interest – a choice that is the best one available for you Social-interest – a choice that leads to an outcome that is the best for society as a whole – an outcome that uses resources efficiently and distributes goods and services equitable (or fairly) among individuals  Resources used efficiently when goods and services are produced at the lowest possible cost and in the quantities that give the greatest possible benefit Conflict between social and self interest  Globalization – the expansion of international trade, borrowing, and lending, and investment  The information-age economy – information revolution was the technological change of the 1990s and 2000s  Global warming –effects on climate change  Natural resource depletion – tropical rainforests and ocean fish stocks are disappearing quickly; when we buy products that destroy natural resources and kill wild fish stocks  Economic instability – a period of financial stress Whatever choice you make, you could have chosen something else. Tradeoff – an exchange – giving up one thing to get something else Guns Versus Butter – the classic tradeoff between “Guns” and “butter” which stand for any pair of goods; if we want more of one thing, we must give up something else to get it: to get more “guns” we must give up some “butter” What tradeoffs – what goods and services are produced depends on choices made by each one of us, by our government, and by the bu
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