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Chapter 1

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ECON 201
Jason Aran

Chapter1Scarcity the condition that arises because wants exceed the ability of resources to satisfy them ScarcityThe ability of each of us to satisfy our wants is limited by the time we have the incomes we earn and the prices we pay for the things we buyEveryone has unsatisfied wants because of the limited productive resources Economics Defined Economic is the social science that studies the choices that individuals business governments and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices Two questions 1How do choices end up determining what how and for whom goods and services get produced2When do choices made in the pursuit of selfinterest also promote the social interestWhat How and For WhomGoods and services are the objects and actions that people value and produce to satisfy human wants When is the Pursuit of SelfInterest in the SocialInterestSelfinterestthe choices that are best for the individual who makes themSocialinterestthe choices that are best for society as a wholeCore Economic Ideas 1People make rational choices by comparing costs and benefits 2Cost is what you must give up to get something 3Benefit is what you gain when you get something and is measured by what you are willing to give up to get it4A rational choice is made on the margin 5Choices respond to incentivesRational Choice Most basic idea of economics is that when people make choices they act rationally Rational choicea choice that uses the available resources to the best achieve the objective of the person making the choice
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