Principles of Economics- Mankiw (5th) 2

Principles of - 4 PA R T O N E INTRODUCTION scarcity the limited nature of societys resources economics the study of how society manages its scarce

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4 PART ONE INTRODUCTION it must also allocate the output of goods and services that they produce. It must decide who will eat caviar and who will eat potatoes. It must decide who will drive a Porsche and who will take the bus. The management of society’s resources is important because resources are scarce. Scarcity means that society has limited resources and therefore cannot pro- duce all the goods and services people wish to have. Just as a household cannot give every member everything he or she wants, a society cannot give every indi- vidual the highest standard of living to which he or she might aspire. Economics is the study of how society manages its scarce resources. In most societies, resources are allocated not by a single central planner but through the combined actions of millions of households and firms. Economists therefore study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings. Economists also study how people inter-
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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