2023Ch1SumMcBr - Limits, Alternatives and Choices Chapter 1...

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Limits, Alternatives and Choices Chapter 1 Notes
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Outline Economics defined Explaining economic behavior Making choices Factors of production Opportunity cost Macroeconomics vs. microeconomics Ceteris paribus Scientific method Positive vs. normative economics Use of graphs
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Economics Defined Economics is a social science dealing with how people, businesses and countries make choices about using scarce resources to satisfy wants. Courses in the social sciences, like economics, attempt to explain human behavior. Since people are different, we can not predict or explain what everyone will do, but rather what most people will do. Economics is not an exact science. Statements that are made about economic behavior are generalizations. “If computer prices fall, people will buy more computers” is a statement that explains behavior. But it doesn’t mean that everyone will buy a new computer.
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Explaining behavior Much of economics deals with cause-effect situations. If a certain economic variable changes, we attempt to predict what will happen as a result. Examples: If taxes fall, what will happen to business investment in machines and computers as a result? If interest rates rise, what will happen to consumer spending as a result? Since economics is not an exact science, to understand what is covered in this course, you must think in terms of probability. Gear your thinking towards the idea of “in all probability what will happen” or “what more than likely will be the result.”
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Making choices Why do we have to make choices? Because we have limited resources to work with, but all these wants to satisfy. All countries, all businesses and all households
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2023Ch1SumMcBr - Limits, Alternatives and Choices Chapter 1...

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