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Chapter 1

Economics Chapter 1 What is Economics.docx

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ECON 1050
Eveline Adomait

Economics Chapter 1 What is economics? 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. Scarcity: the inability to get everything we want Microeconomics: study of the choices that 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 people value and produce to satisfy human wants - goods are physical objects - services are tasks performed for people Factors of production: productive resources used to produce goods and services, such as land, labour, capital, entrepreneurship. Land- natural resources Labour- work time ad work effort that eople devote to producing goods and services. It includes the physical and mental efforts of all the people who work on farms, construction sites, factories, shops, offices. Quality of labour depends on human capital: the knowledge and skill that people obtain from education, on-the-job training, and work experience. Capital: the tools, instruments, machines, buildings, and other construction that businesses use to produce goods and services. Financial Capital: money, stocks and bonds Entrepreneurship: human resource that organizes labour, land, and capital. They come up with new ideas about what and how to produce, make business decisions, and bear risks that arise from these decisions. Land earns rent Labour earns wages Capital earns interest Entrepreneurship earns profit Self-interest: a choice is in your self-interest if you think that choice is the best one available for you Social interest: a choice is in the social interest if it leads to an outcome that is the best for society as a whole Efficiency- achieved when the availa
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