Chapter 1: The Scope and Method of Economics
Economics: the study of how individuals and societies choose to use the scarce resources
that nature and previous generations have provided.
-Scarcity forces people to apply economic concepts. The government decides how
the resources are allocated.
-Society= level of organizations
Highest level- Government, businesses, communities
Three fundamental concepts:
1. Opportunity cost- what you give up for something else
2. Marginalism- the cost of one more unit (Incremental cost)
3. Efficient markets- the market takes the resource and maximizes the
returns/gains for that resource.
Rational thinking is based on knowledge, data, and analysis
Efficiency: maximizing your output given the input.
Industrial Revolution: the period in England during the late eighteenth and early
nineteenth centuries in which new manufacturing technologies and improved
transportation gave rise to the modern factory system and a massive movement of the
population from the countryside to the cities.
-The study of economics is an essential part of the study of society.
-To be an informed citizen requires a basic understanding of economics.