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Topic 1 _ Part 1 - PART I INTRODUCTION TO ECONOMICS The...

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1 PART I INTRODUCTION TO ECONOMICS The Scope and Method of Economics
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CHAPTER 1 The Scope and Method of Economics 2 of 34 1 PART I INTRODUCTION TO ECONOMICS The Scope and Method of Economics Why Study Economics? To Learn a Way of Thinking To Understand Society To Understand Global Affairs To Be an Informed Voter The Scope of Economics Microeconomics and Macroeconomics The Diverse Fields of Economics The Method of Economics Theories and Models Economic Policy An Invitation Appendix: How to Read and Understand Graphs CHAPTER OUTLINE
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CHAPTER 1 The Scope and Method of Economics 3 of 34 The Scope And Method Of Economics economics The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. key word: choose. Economics is a behavioral, or social, science. In large measure it is the study of how people make choices. The choices that people make, when added up, translate into societal choices.
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CHAPTER 1 The Scope and Method of Economics 4 of 34 Three fundamental concepts: Opportunity cost Marginalism , and Efficient markets To Learn A Way Of Thinking Why Study Economics?
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CHAPTER 1 The Scope and Method of Economics 5 of 34 opportunity cost The best alternative that we forgo, or give up, when we make a choice or a decision. scarce Limited. Why Study Economics? Opportunity Cost To Learn A Way Of Thinking
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CHAPTER 1 The Scope and Method of Economics Question The reason that opportunity costs arise is that A) an economy relies on money to facilitate exchange of goods and services. B) resources are scarce. C) there are no alternative decisions that could be made. D) people have limited wants.
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CHAPTER 1 The Scope and Method of Economics Question Which of the following is NOT an opportunity cost of attending college? A) the tuition you pay B) the income you could have earned if you didn't attend college C) the alternative uses of the time you spend studying D) the cost of the food that you consume while you are attending college
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CHAPTER 1 The Scope and Method of Economics Question If you own a building and you decide to use that building to open a book store, A) there is no opportunity cost of using this building for a book store because you own it. B) there is an opportunity cost of using this building for a book store because it could have been used in other ways. C) there are no sunk costs involved in this decision. D) the only cost relevant to this decision is the price you paid for the building.
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CHAPTER 1 The Scope and Method of Economics 9 of 34 Why Study Economics? marginalism The process of analyzing the additional or incremental costs or benefits arising from a choice or decision. sunk costs Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred.
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