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Chapter10 - Introduction Economics What does economics...

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Introduction
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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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Two Subfields of Economics • Microeconomics – The study of how households and firms make decisions and how they interact in specific markets and industries. • Macroeconomics – The study of economy-wide phenomena.
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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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Opportunity Cost Opportunity Cost: The value of the next best alternative that must be foregone in order to undertake an activity.
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