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Chapter 1

Chapter 1 Notes FULL lecture notes for Chapter 1

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Angela Trimarchi

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Econ 102 Chapter 1 Notes Prof: Angela Trimarchi
Chapter One
What is Economics?
Economics studies how:
oSociety manages its scarce resources
oPeople use scarce resources to satisfy unlimited human
oEconomics is a social science
Economic Resources:
1. Land: natural resources
2. Labour: physical and mental efforts in production
3. Capital: machinery, equipment, structures
4. Entrepreneurship: puts together resources
Key Ideas
People must make choices
oMaking choices leads to costs!
Opportunity Cost: The best/ highest alternative forgone
Opportunity costs includes direct costs and indirect costs
oDirect costs: out of pocket costs (explicit)
oIndirect costs: not paid to anyone, but are still costs
Two Main Branches of Economics:
Microeconomics: studies individual economic units
Macroeconomics: studies economy-wide phenomena
Margins and Incentives: Choices are made at the margin and are
influenced by incentives
Margins: A choice at the margin is a decision to engage in one more
unit of an activity
Incentive: A motivation to perform a particular activity
Two Types of Economic Statements:
Positive Statement:
oA statement about what is
oValue free
Normative Statement:
oA statement about what ought to be
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