What is Economics
Women & Men
Economics is concerned with wants and resources.
, but wants are
wants > resources available
with scarcity, we must choose among the
the choices that we make
depend upon the
that we face
an incentive is a reward that encourages an action or a
penalty that discourages one
Economics is the science of choice
Economics is a social science that studies choices that individuals, businesses, governments, and entire
societies make as they
that influence and reconcile those
The subject of economics is divided into two main parts: microeconomics and macroeconomics
is the study of the choices that individuals and businesses make, the way these
choices interact in markets, and the influence of governments.
is the study of the performance of the national economy and the global economy.
That is choices of individuals and businesses and governments, and the
interaction of those choices in the standard of living, the cost of living and economic fluctuations
Two big economic questions
How do choices end up determining what, how and for whom goods and services are produced?
are physical objects satisfy human wants.
are tasks performed for people such as auto-repair service and cell-phone service.
(i) What goods and services are produced?
(ii) How? Goods and services are produced by using
(factors of production)
Factors of productions
: gifts of nature that we use to produce goods and services. Land is natural resources such as
minerals, oil, gas, coal, water, air, forests and fish.
that people devote to producing goods and services.
includes the physical and mental efforts.
(the quality of labor) is the
knowledge and skill that people obtain from education, on-the-job training, and work
: the tools, instruments, machines, buildings, and other constructions that businesses use to
produce goods and services.
: the human resource that organizes labor, land and capital.
(iii) For whom?
Who consumes the goods and services that are produced depends on the incomes that
People earn their incomes by selling the services of factors of production they own.
(b) Labor earns