Chapter 1 - BYUI-Idaho ECON 151 Class Notes Extracted from...

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BYUI-Idaho ECON 151 Class Notes Extracted from Chapter 01 - Limits, Alternatives, and Choices and Appendix 1-1 CHAPTER ONE: LIMITS, ALTERNATIVES, AND CHOICES (+ APPENDIX) I. Chapter Overview This chapter begins with a discussion of the meaning and importance of economics. In this first chapter, however, we will not plunge into problems and issues; instead we consider some important preliminaries. We first look at the economic perspective how economists think about problems. Next, we examine the specific methods economists use to examine economic behavior and the economy, including distinguishing between macroeconomics and microeconomics. We then look at the economizing problem from both an individual and societal perspective. For the individual we develop the budget line, for society the production possibilities model. In our discussion of production possibilities, the concepts of opportunity costs and increasing opportunity costs, unemployment, growth, and present vs. future possibilities are all demonstrated. Finally, in the Last Word, some of the problems, limitations, and pitfalls that hinder sound economic reasoning are examined. The Appendix to Chapter 1 provides an important introduction to graphical analysis. While this will be review material for most of you, for some this may be new. Reviewing this analysis will help you understand this class easily. Learning objectives After reading this chapter, you should be able to: 1. Define economics and the features of the economic perspective. 2. Describe the role of economic theory in economics. 3. Distinguish microeconomics from macroeconomics and positive economics from normative economics. 4. List the categories of scarce resources and nature of the economizing problem. 5. Apply production possibilities analysis, increasing opportunity costs, and economic growth. 6. Explain how economic growth and international trade increase consumption possibilities. 7. Understand graphs, curves, and slopes as they relate to economics (Appendix). II. Definition of Economics A. The social science that studies how individuals, institutions, and society make optimal choices under conditions of scarcity . B. Human wants are unlimited, but the means to satisfy the wants are limited . III. The Economic Perspective A. Scarcity and choice 1. Resources can only be used for one purpose at a time. 2. Scarcity requires that choices be made. 3. The cost of any good, service, or activity is the value of what must be given up to obtain it. This is known as the opportunity cost. B. CONSIDER THIS Free for All?
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BYUI-Idaho ECON 151 Class Notes Extracted from Chapter 01 - Limits, Alternatives, and Choices and Appendix 1-2 1. Products provided for “free” to an individual are not free for society because of the required use of scarce resources to produce them.
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