chp2_sum - CHAPTER 2 THE ECONOMIC PROBLEM: SCARCITY AND...

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CHAPTER 2 THE ECONOMIC PROBLEM: SCARCITY AND CHOI CE What is Economics? Economics is a social science that studies how people use scarce resources to satisfy unlimited wants . Scarcity and Economics Economic questions arise because we always want more than we can get, so we face scarcity . Scarcity exists when there is less of a resource than what is demanded. In other words scarcity exists when something is limited and wanted. Example of a scarce resource: time. Scarcity forces us to make choices over the available alternative. One main job of an economist is to advise policy makers who wants to know how policy changes will affect society. Whenever you make a choice, in any situation, not just a financial one, you are forever forgoing any benefit or utility that could have been derived from the next best alternative. This is because you had the opportunity to choose that alternative at that moment, but instead you choose to devote your money, time, energy, etc to the choice you think most beneficial to you. Opportunity Cost Definition: The value of the single best alternative that we give up when we make a choice. Opportunity costs can be monetary or things such as time spent with family, etc.
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This note was uploaded on 03/27/2009 for the course EC Ec201 taught by Professor Koksal during the Spring '07 term at N.C. State.

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chp2_sum - CHAPTER 2 THE ECONOMIC PROBLEM: SCARCITY AND...

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