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Econ ch1

Econ ch1 - Chapter 1 Economics the Study of Scarcity and...

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Chapter 1: Economics: the Study of Scarcity and Choice I. Scarcity – occurs because human wants are virtually unlimited, but productive resources and time are a) scarcity necessitates trade-offs – you can select only a few of all the things you want ii. economics – study of how people, individually and collectively, allocate their limited resources to try to satisfy their unlimited wants iii. goods – any item or service that adds to human happiness a) scarce if the amounts that people want exceed the amounts freely available commodities – tangible goods that can be bought and sold, such as cars or VCRs services – (ex, haircuts or police protection) also goods because they add to our happiness garbage – an economic bad (anything that reduces happiness) is not scarce free goods – desirable things that are not scarce (ex, heat from the sn) b) the possession of a specific nit of a given good as either: value in use or value in exchange B. Production and Resources i. production – entails using technology to apply energy to materials in ways that make the materials more valuable or that otherwise help satisfy human wants a) productive resources (factors of production or inputs) – come in all types, shapes, and sizes, and are all limited b) 4 categories of resources: Labor – physical and mental talents that people can make available for production typically measured by time available for work during a period wages – payments per period for labor services (includes salary, commission, fringe benefits, etc.) land – includes all natural resources, such as raw land, minerals, water, climate, and forests rent – payments per period for use of land capital – improvements that make natural resources more prodctive; includes all produced resources such as buildings, machinery, and roads investment – production of new capital
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