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Economics (923)
ECN 340 (22)
Chapter 1

Chapter 1

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Department
Economics
Course
ECN 340
Professor
Thomas Barbiero
Semester
Fall

Description
Meaning of the Economic Approach  A thought process, or the unique manner in which we approach problems confronted by human beings  A mental skill that incorporates a special view of human behaviour  Arises because of » A) Unlimited desires: amount of love you have, friends, how satisfied with your partner, how your parents are with you » B) Limited resources to satisfy those desires: Ex. invited to 2 parties, but you want to go to both Meaning of Economics  Unlimited desired includes both material and non-material wants: love, health, friendship, sex, vacations, good looks (thus plastic surgery), length of life, etc.  There are limited resources to satisfy all these wants (including time)  People exchange goods and services: they exchange those things they have in abundance for those that don’t have and want to max satisfaction Thinking in terms of Abstractions  Economists use theory to explain the world around them  Theory: simplification or generalization that captures a reality. Ex. When the price of a product falls, generally, more of it is purchased  Theory (or models) are going to be used to explain much of human behaviour  Acceptability: we accept those theories that explain and predict Thinking about values  Economists use the “amoral approach” to analyzing issues and problems facing human beings  “Amoral approach” is devoid of our own values (you do not impose your value on what others are doing)  The economist tries to understand the behaviour of others given their own values Thinking about people  Focus is the individual (not groups)  Individual has values, make choices and takes action  “Social goals” reflect individual values; “society” is not independent from individuals Thinking about Rationality  Human beings act with a purpose; we assume they know what they are doing  Purpose is to improve their lot: to maximize satisfaction  But in trying to maximize satisfaction there are constraints: environmental, social, and biological » Social: women 100 years ago had certain constraints that are different to women today  Many social scientists believe environment DETERMINES human behaviour, rather than influences it (what economists maintain) Insatiability  Individuals prefer more to less of what they want—they are insatiable (greedy)  Problem of uncertainty in trying to max satisfaction—people choose an action each believes will give greatest satisfaction, but choices many not turn out. » Ex. choosing a spouse may not work out later; choosing a field or job specialization may later prove to be unwise because there are no jobs Summary  People have desires  Scarcity of means in relation to desires (demand) creates the economic problem  Desires may be material or non-material  People know what they want and try to fulfill as many desires as possible, subject to constraints (environmental, social and biological)  As individuals try to maximize satisfaction subject t
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