Chapter%201 - Econ 160, Vardanyan Chapter 1 Introduction:...

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Econ 160, Vardanyan 1 Chapter 1 Introduction: What is Economics? What is Economics? Economics is the study of choices made by people who are faced with scarcity. Scarcity is a situation in which the resources are limited and can be used in different ways, so one good or service must be sacrificed for another. For example, the time that you have during a given day is limited to 24 hours, so that when you spend more time in a gym you’ll have less time left to read a book. Similarly, every country has a limited amount of resources (land, capital, etc.), so when more of these resources is spent on the production of tanks less will be available for the production of food, clothing, TV sets, etc. Thus, economics is the science about the best ways of allocating scare resources . What products do we produce in an economy? How are these products being produced? Who consumes these products? The goods (such as cars, pens, books, etc.) and services (such as services of lawyers, doctors, educators, etc.) are produced using factors of production , which are also called inputs . They are - Natural resources – resources created by acts of nature, including land, water, deposits of oil, gas, and minerals - Labor – human effort, including physical and mental effort used to produce goods and services - Physical capital – human-made tools used in the production of goods and services, such as computers, hammers, roads, etc. - Human capital – knowledge and skills acquired through education and training, i.e. the expertise possessed by surgeons, musicians, and operators of heavy machinery. Education can be thought of as a way of enhancing one’s
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This note was uploaded on 05/27/2008 for the course ECON 160B taught by Professor Michaelvardanyan during the Fall '08 term at Binghamton University.

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Chapter%201 - Econ 160, Vardanyan Chapter 1 Introduction:...

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