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Unformatted text preview: Introduction I. Economics is the study of choices 3 made in the face of scarce 2 resources 1 . (the study of how people respond to incentives) 1. Resources (also known as factors of production): a. Land – any natural endowments (includes land, flora, fauna, minerals, water, etc.) b. Labor – physical human resources c. Physical Capital – manufactured aids to production (tools, machinery, buildings, etc.) d. Human Capital – mental human resources (also manufactured through training, learning-by-doing, education, etc.) 2. Scarcity: in relation to human wants (needs) existing resources are inadequate. 3. Choice: Because resources are scarce for the time being, societies, businesses, households and individuals must make choices about what and how much they can have. Therefore, something must be given up or done without. This means there are costs associated with every choice. II. Opportunity Costs – the cost of obtaining anything (material or other items) is the value of what must be given up to obtain that item. National Income and GDP...
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