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Unformatted text preview: The Central Idea Economics the study of how people deal with scarcity Scarcity the situation in which the quantity of resources is insufficient to meet all wants. Market an arrangement by which economic exchanges between people take place. Scarcity and Choice for Individuals Two Fundamental Individual Choices: What to Consume (Consumer Decisions) What to Produce (Producer Decisions) Scarcity and Choice for Individuals Budget Constraint: a scarce amount of funds that limits an individual's spending. Opportunity Cost (of a choice): the value of the best alternative that was not chosen because something else was chosen. Producer Decisions Now, consider a situation with two producers: Emily the poet and Johann the Printer. Below is a summary of the choices for Emily and Johann face because of scarcity. Economic concepts Comparative Advantage: a situation in which a person or group can produce one good at a lower opportunity cost than another group. Specialization: concentration of production effort into a single specific task. Division of Labor: th...
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This note was uploaded on 06/01/2010 for the course ECON STA2012 taught by Professor Fan during the Spring '10 term at A.T. Still University.

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