Chapter 1- Nature of Economics
- science studying the choices people make to satisfy wants. (study of wants)
Macroecomomics vs. Microeconomics
Micro involves decision making by households and individuals.
Macro involves the economy on the whole, it deals with unemployment, price stability, and national
Economists assume people make decisions based on their best interests. (Rationality assumption, also
involves goals such as love, friendship, prestige, power), by assuming rationality models economists can
develop ideas about how people choose to satisfy wants.
Economists maintain that the unit of analysis is the individual; members of a group will pursue their own
goals rather than the groups objectives.
is objective and scientific and deals with testable if this, then those hypotheses.
is subjective and deals with value judgments, what should be, or ought to be.
Chapter 2 –Scarcity and the world of Trade-Offs
- individuals and communities do not have the resources to satisfy all their wants.
If the price of good B is zero, and society cannot get all that it wants of good B, then B is scarce.
Factors of Production
Land, the natural resource, Labor, Physical capital (machines, buildings and tools), Human capital
(Educations and training), entrepreneurship (managing, organizing, assembling, and risk taking)
- anything from which people derive happiness (Economic goods are scarce, noneconomic goods
are not scarce, services are intangible goods)
Wants vs. Needs
- needs are basic, could be a wish, want, or life-saving necessity / wants are needs in
- Arises due to scarcity, people must use trade-off options, highest valued next best
alternative that must be given up to attain something or satisfy a want.
Cost is always a forgone opportunity, limited resources and unlimited wants leads to scarcity which leads
to choices which leads opp. Cost. (When resources are used for one activity the user is trading off the
opportunity to use those resources on another activity.