Ch 3-2 - an afternoon of golf or an afternoon of business...

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The Economic Way of Thinking
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Scarcity in Economics We want more than we can get. We want a peaceful and secure world. We want clean air, lakes, and rivers. We want long and healthy lives. We want good schools, colleges and universities. We want comfortable homes. We want sports and recreational gear. We want time to enjoy sports, games, novels, movies, music, travel, and hanging out with friends.
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Scarcity in Economics Our ability to get what we want and need is limited: By time, By our income, By the prices we must pay. What we can get as a society is limited: By natural endowments of fertile land, conducive climate, deposits of valuable metals and minerals, human labor and ingenuity, tools and equipment that we have produced.
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Scarcity and Choice Given the inescapable reality of scarcity, we must choose among available alternatives: A child with a dollar must choose between the soda or the candy. A millionaire executive must choose between
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Unformatted text preview: an afternoon of golf or an afternoon of business meetings. Society must choose among health care, national defense, and environmental protection. Choices and Incentives The choices we make depend in part on the incentives that we face. Incentive defined: a reward that encourages or a penalty that discourages an action. If the price of soda falls, the child has an incentive to choose more soda. If a $10 million dollar deal is at stake, the millionaire CEO has an incentive to skip the golf game. As computer prices fall, schools have an incentive to connect more classrooms to the internet. Economics Redefined Economics is the social science that studies the choices that individuals, businesses, governments, and entire societies make as they confront scarcity and the incentives that influence and reconcile those choices. Two main parts of economics: Microeconomics Macroeconomics...
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Ch 3-2 - an afternoon of golf or an afternoon of business...

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