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Chapter 1

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Economics 1021A/B
Bruce Hammond

Economics 1021: Chapter 1 Text Book Notes What is Economics? Definition of Economics  All economic questions arise from scarcity – from the fact that wants exceed the resources available to satisfy them o Scarcity: we want more than we can get  Economics is the social science that studies the choices that people make as they cope with scarcity  The subject divides into microeconomics and macroeconomics o Microeconomics: the study of choices that individuals and businesses make o Macroeconomics: the study of performance of the national economy and the global economy Two Big Questions  Two big questions summarize the scope of economics 1. How do choices end up determining what, how, and for whom goods and services are produced? i. WHAT: In Canada; agriculture accounts for 2%, manufactured goods for 20% and services for 78% of total production. What we produce varies across countries and changes over time. ii. HOW: Goods and services are produced by using productive resources that economist call factors of production (Land, Labour, Capital, Entrepreneurship) iii. FOR WHOM: Who consumes the goods and services that are produced depends on the incomes that people earn (land earns rent; labour earns wages, capital earns interest, entrepreneurs earn profit) 2. When do choices made in the pursuit of self-interest also
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