EconNOTES - Chapter 1 (Introduction) Economics is often...

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Chapter 1 (Introduction) Economics is often defined as the study of how society allocates limited (scarce) economic resources among alternative uses to satisfy the unlimited desires of its members. The economy is the mechanism through which the use of labor, land, structures, equipment, and natural resources among these alternative uses is organized (coordinated) to satisfy the desires of the members of a society. The definition of economics above provides an overview of some of the topics we'll be covering this semester: Economic (or natural) resources - This course will study the utilization of economic, or natural, resources. Natural resources are the lands, water, minerals, animals and other God-given resources that are available for producing goods and services. Natural resources are limited in quantity. This creates the problem of scarcity, which refers to the perpetual imbalance between our desires and the means of satisfying those desires - i.e., limited resources vs. unlimited desires. Human wants are unlimited. Because our resources are limited, the problem of scarcity requires us to make choices about what goods and services will be produced. The study of economics is concerned with how these choices are made. Consider a town which has limited natural resources and which is currently producing only two goods (for example, food and tractors). In order to produce more of one good, the town must give up some of the other good. The amount given up represents the opportunity cost to the town of producing the additional units of the first good. Opportunity cost refers to the value of what our natural resources could have produced if they had been used in the next best alternative way. Another example of opportunity cost
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can be found in your decision to attend this on-line college course. Your attendance requires the obvious tuition payments, but also includes opportunity costs such as lost wages during the time you are attending class, lost value of leisure time, etc. All societies must answer the following basic economic questions: What will be produced? Natural resources, technology, and availability and skill level of labor force are all limited and thus aggregate production capability is limited. Increasing production of one commodity means reducing production of some other commodity. How will goods and services be produced? Changes in technology, labor and equipment can impact both the quantities produced and the methods used to produce them. To whom will the goods and services be distributed? In a free market society, goods and services are distributed to those who are willing and able to pay for them. In our free market economy, the price system goes far towards answering these questions. This course is called microeconomics because it concentrates on the choices
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This note was uploaded on 04/16/2008 for the course MANA 3301 taught by Professor Smiles during the Spring '08 term at Dallas Baptist.

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EconNOTES - Chapter 1 (Introduction) Economics is often...

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