Econ chapter 1 notes

Econ chapter 1 notes - Economics is the study of the...

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Economics is the study of the allocation of our limited resources to satisfy our unlimited wants. Economics is concerned with the choices people make, human decision makers and the factors that influence their choices, and the allocation of limited resources to satisfy unlimited wants. Resources are inputs used to produce goods and services. Land, human effort and skills, and machines and factories are examples of resources. Scarcity describes the fact that our wants exceed our limited resources. If a good is scarce, our unlimited wants exceed our limited resources. Increasing the amount of resources available would NOT eliminate scarcity. Living in a world of scarcity involves trade-offs. Scarcity forces us to make choices on how best to spend our lmited resources. Choices are costly because we must give up other opportunities that we value--this is the "economic problem". If it weren't for scarcity, people could have all the goods and services they wanted for free; it would no longer be necessary to make choices; and poverty would be eliminated. Aggregate means total amount. Macroeconomics deals with the aggregate, or total economy. A decrease in the unemployment rate would likely be a topic of discussion in Macroeconomics. Microeconomics deals with smaller units within the economy. Microeconomics attempts to understand the decision-making behavior of firms--whether small or large--and households and their interaction in markets for particular goods or services. Topics of microeconomics include discussions of health care, agricultural subsidies, the price of everyday items, the distribution of income, and labor's impact on wages. When we look at a particular segment of the economy, we are studying Microeconomics. The effects of an increase in the supply of lumber on the home-building industry is a topic which would be covered in Microeconomics. Changes in the national unemployment rate is a topic which would be covered in
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This note was uploaded on 01/28/2009 for the course ECON 1435 taught by Professor Sexton,r during the Spring '09 term at Pepperdine.

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Econ chapter 1 notes - Economics is the study of the...

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