Microeconomics – Chapter 1: What is Economics? (Pages 1-11)
Definition of Economics
Our inability to satisfy/get everything we want is called scarcity.
We must make choices due to scarcity.
Incentives (rewards) encourage actions, while penalties discourage them.
Economics 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.
Study of choices individuals and business make, they way these
choices interact in markets, and the influence of governments.
o Ex: Why are people downloading more movies?
o How would a tax on e-commerce affect eBay?
Study of the performance of the national economy and the global
o Ex: Why is the Canadian unemployment rate so high?
o Can the Bank of Canada make our economy expand by cutting
2 Big Economic Questions
1. How do choices end up determining what, how, and for whom goods and
services and produced?
2. Can the choices that people make in the pursuit of their own self-interest also
promote the broader social interest?
What, How, Whom
Goods and Services are objects that people value and
produce to satisfy human wants.
Factors of production are used to determine these
patterns, includes 4 categories:
Entrepreneurship Land is known as the gift of nature, earns rent.
Labour refers to the work time & effort people use to producing g/s, earns wages.
Capital is known as human capital (quality of labour), and capital (machines.
Buildings etc…) earns interest
Entrepreneurship is the human resource, that organizes land, labour and capital,
Self-Interest - Choices you think are the best for you.
Social Interest – Choices best for society, includes;
Achieved when available resources are used to produce g/s at the
lowest possible price & in quantities that give the greatest possible
Fairness, but economist of different views of this.
4 Topics between Self-Interest & Social-Interest include:
2. The Information-Age Economy
3. Global Warming
4. Economic Instability
The expansion of international trade
o Includes borrowing, lending and investing.
Self Interest for consumers to buy low-cost imported g/s.
Self Interest for businesses to produce in low cost regions and sell in
high cost regions.
Is there a Social Interest? (Low wage workers and Canadian firms
The Information- Age Economy
Technology change within last 40 years, known as information
Provides us with cellphones, laptops, Internet etc… (self- interest)
Self-Interest for companies $$
Global Warming (Climate Change)
Self Interest to use electricity and gas contributes to carbon emissions.
Contributes to carbon footprint, alternatives to lessen it.
o Walking, riding a bi