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Chapter1 - Introduction Economics What does economics study...

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1 Introduction Economics What does economics study? Fundamental Economic Problem: Resources are scarce. Scarcity : society has limited resources and therefore cannot produce all the goods and services people wish to have. – Economics studies how the society manages or allocates its scarce resources.
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2 Scarcity Which of the following is scarce? A. Land B. Diamond C. Nike shoes D. Water E. All of the above Tradeoffs People Face Tradeoffs – To get one thing, people need to give up another. What are the tradeoffs faced by the following? A. A member of Congress deciding how much to spend on national parks. B. Your friend Henry treats you to a movie.
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3 Opportunity Cost Opportunity Cost: The value of the next best alternative that must be foregone in order to undertake an activity. When you undertake an action there are many other things you could possibly do. The opportunity cost of that action is the value of the next best alternative.
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