Assignment 1.docx - Chapter 1,2 NOTES Brief overview of key...

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Chapter 1,2 NOTES Brief overview of key issues in economics: Scarcity and choice o Scarcity , in general terms means that the demand for something is much greater than the supply, or there is not enough money to buy it. The exact definition in economics is that there are insufficient resources to satisfy everyone’s needs and wants. o Scarcity always leads to choice , and people can actually make better decisions because they have a better understanding of how much each choice costs. Specialization : When workers or firms focus on particular tasks for which they are well-suited within the overall production process o Allows workers to focus on the parts of the production process where they have an advantage o Workers specialized in certain tasks often produce more quickly and higher quality. o Specialization allows businesses to take advantage of the economies of scale , which means that for many goods, as the level of production increases, the average cost of producing each individual unit declines. division of labor : the way in which the work required to produce a good or service is divided into tasks performed by different workers. markets opportunity cost : measures cost by what is given up in exchange; opportunity cost measures the value of the forgone alternative models: economists use the term model instead of theory. Model is more applied or empirical presentation. Models are used to test theories, but for this course we will use the terms interchangeable. scientific method fallacies: The fallacy of composition is when an individual infers that something is true of the whole because it is true of part of the whole. In economics, this reasoning often leads to incorrect conclusions. Ex: If you stand up at the baseball game, you can see better.
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