What is Economics? Chapter 1 9/9/2012 5:09:00 PM
We face scarcity, We want more than we can get
and our choices are
affected by Scarcity – inability to satisfy all our wants
incentives. - everyone faces scarcity
- eg. A city wants to build bridges, improve education and upgrade
Give an example of
scarcity and The choices we have to make depend on incentives
Incentives – a reward that encourages or a penalty that discourages an action
Economics - social science, studies choices that individuals and businesses make while
facing scarcity and incentives
Define economics Microeconomics – choices individuals and businesses make, and how they influence
and distinguish markets, the influence of governments
between micro and - eg. How would a new tax rule affect Google?
Macroeconomics – performance of the national economy and the global economy.
Give examples. - eg. Why did inflation in Canada start to increase in 2008?
Explain the two big Two Big Economics Questions
questions of 1. How do choices end up determining what, how, and for whom goods and services
economics are produced?
2. How can choices made in the pursuit of self-interest also promote the social
Explain the Goods & Services
difference between - Goods > physical objects eg. Cars
goods and services. - Services > tasks performed for people eg. Car repair
4 Factors of Production
What are the factors 1. LAND - rent
of production? Give 2. LABOR - wages **most income
examples. 3. CAPITAL - interest
4. ENTREPRENEURSHIP - profit
1. Gas, coal, oil, water, air, natural resources
2. Effort people put to produce goods and services, labor quality depends on human capital
– knowledge and skill people obtain
3. Tools businesses use to obtain goods and services, different from financial capital
4. Human resources that organize labor, land, capital
What is the If you are making a choice that is the best for you, it is in self-interest.
difference between If these choices lead to a result that benefits society as a whole, then it promotes social
self and social interest. interest?
Resources are used efficiently when:
When are resources 1. At the lowest possible cost
used efficiently? 2. In the quantities that give the greatest possible benefit.
What areas show the Tension between social and self-interest is shown in 5 aspects.
social and self- Globalization – expansion of international trade, borrowing and lending, and investment
interest? Give Information Revolution – 1990s, 2000s
examples. Global Warming
Natural Resource Depletion
What is th