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ECON 1000
Ying Kong

Chapter 1 What is EconomicsDefinition of EconomicsAll economic questions arise because we want more than we can getOur inability to satisfy all our wants is called scarcityBecause we face scarcity we must make choicesThe choices we make depend on the incentives we faceAn incentive is a reward that encourages an action or a penalty that discourages an actionEconomics is 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 choicesEconomics divides into 2 main partsMicroeconomics is the study of choices that individuals and businesses make the way those choices interact in markets and the influence of governments o An example of a microeconomic question is Why are people buying more ebooks and fewer hardcopy booksMacroeconomics is the study of the performance of the national and global economies o An example of a macroeconomic question is Why is the unemployment in Canada so highTwo Big QuestionsTwo big questions summarize the scope of economics 1 How do choices end up determining what how and for whom goods and services get produced 2 When do choices made in the pursuit of selfinterest also promote the social interestWhat How and For WhomGoods and services are the objects that people value and produce to satisfy human wants WhatIn Canada agriculture accounts for 2 percent of total production manufactured goods for 20 percent and services retail and wholesale trade health care and education are the biggest one 78 percentIn China agriculture accounts for 11 percent of total production manufactured goods for 49 percent and services for 40 percentThe figure shows the ratios of agriculture manufacturing and services in Canada Brazil and China being compared with one anotherWhat determines these patterns of productionHow do choices end up determining the quantity of each item produced in Canada and around the world HowGoods and services are produced by using productive resources that economists call factors of productionFactors of production are grouped into four categoriesLand the gift of nature that we use to produce goods and servicesLabour the work time and work effort that people devote to producing goods and servicesCapital the tools instruments machines buildings and other constructions that businesses use to produce goods and servicesthe QUALITY of labour depends on the human capital which is the knowledge and skill people obtain from education onthejob training and work experienceEntrepreneurship the human resource that organizes land labour and capital
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