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Chapter 1

Chapter 1 ECON 1000.docx

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ECON 1000
Steven Edwards

Economics 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 choices. There are two parts of economics: - - Microeconomics - Macroeconomics Microeconomics is the study of choices that individuals and businesses make, the way these choices interact in markets and the influence of governments. Macroeconomics is the study of the performance of the national economy and the global economy. Scarcity is the economic problem of having fewer resources than needed to fill human wants and needs. It is universal and it confronts all living things. There are two big economic questions: - - How do choices end up determining what, how, and for whom goods and services are produced? - Can the choices that people make in the pursuit of their own self-interest also promote the broader social interest? Goods and services are the objects that people value and produce to satisfy human wants. Examples of some goods are cellphones and automobiles. Some examples of service examples are cell phone service and auto repair service. Goods and services are produced by using productive resources that economists call factors of production. There are four types of factors of production: - - Land (rent) - Labour (wages) - Capital (interest) - Entrepreneurship (profit) Land are the natural resources that we use to produce goods and services such as oil, gas, coal, water, air, forests, fish, etc. Labour is the amount of time and effort that people work in order to produce the goods and services needed. It also earns the most income which is around 70% of total income. Capital is the tools, instruments, machines, buildings and other constructions that businesses use to produce goods and services. Entrepreneurship is the human resource that organizes labour land and capital together. Human Capital is the knowledge and skill that people gain from education, job training and work experience. It continues to grow as you gain work experience. Self Interest is the choice that you make which you think is best for you. You use your time and resources in the ways that is best for you but you don’t think about how your choices might affect others. Social Interest is the choice which leads to an outcome that is best for society. There are two dimensions to social interest: - - Efficiency - Equity Efficiency is when resources are put to thei
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