01 – what iseconomics?
Chapter 1: What Is Economics?
we want more than we can get
scarcity: inability to satisfy all our wants
we must choose among available alternatives
incentive: a reward that encourages an action or a penalty that discourages one
economics: the study of 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 that individuals and businesses make
macroeconomics: the study of the performance of the national economy and the global economy
how do choices end up determine what, how, and for whom goods and services are produced?
how can choices made in the pursuit of self-itnerest also promote the social interest?
What, Howand For Whom?
goods and services: are the objects that people value and produce to satisfy human wants
goods are physical objects
services are tasks performed for people
who decides what to produce?
how do choices end up determining the number of goods to produce?
factors of production: product resources used to produce goods and services
land – natural resources
labour – work time and effort that people devote to produce goods and services
the quality of labour depends on human capital (knowledge and skill)
capital – tools, instruments, machines, buildings, etc
entrepreneurship – the human resource that organizes labour, land and capital
who consumes the goods and services?
a large income allows someone to buy more goods and services
people earn income by selling the services of the factors of production that they own
land - rent
labour – wages
capital – interest
entrepreneurship - profit
HowCan the Pursuit of Self-interest Promote theSocialInterest?
the best choice available to an individual
use your time and resources to benefit you, instead of thinking of others
ex – order delivery for pizza because you’re hungry, not because the delivery person needs income
when acting on self-interest, one often comes in contact with many of other people who produce and deliver
goods and services
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self-interest choices promote social interest if they lead to an outcome that is best for the society
resources are used efficiently when goods and services are produced
at the lowest possible cost, and
in the quantities that give the greatest possible benefit
The Economic Wayof Thinking
Choice and Tradeoffs
have to make choices because of scarcity
tradeoff: giving up one thing to get something else
if we want more of one thing, we must give up something else to get i