Chapter 1 - Chapter 1 The Challenge of Economics 1 Why cant we have everything we want a Our materialistic wants and desires continue to grow b Our

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1 Chapter 1 The Challenge of Economics 1. Why can’t we have everything we want? a. Our materialistic wants and desires continue to grow: b. Our wants exceed our resources. 2. The Central Problem of Scarcity a. Economics The study of how best to allocate scarce resources among competing uses. b. Opportunity Cost The most desired goods and services that are foregone in order to obtain something else. The highest valued alternative that is sacrificed for the chosen alternative. The next best alternative that you give up. c. Factor of Production Resource inputs used to produce goods and services. Land, labor, capital, and entrepreneurship. d. Scarcity Lack of available resources to satisfy all desired uses of those resources. Central problem of economics. 3. Three Basic Economic Questions a. What to produce? b. How to produce? c. For whom to produce? 4. What to Produce a. Because wants exceed resources, we have to decide what we want most, sacrificing less desired activities and goods. Land – including natural resources
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2 Labor – number and skills of workers Capital – machinery, buildings, networks Entrepreneurship – skill in creating products, services, and processes b. The first economic goal of any society is to produce that optimal mix of output. c. Production Possibilities The alternative combinations of goods and services that could be produced in a given time period with all available resources and technology. Dispensing vs Patient Counseling d. Production Possibilities Curve e. The Choices Nations Make
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3 During periods of war or military buildup, a nation must choose whether to produce military goods or consumer goods with its scarce resources Health Care System? f.
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This note was uploaded on 04/30/2011 for the course ECONOMICS 2201 taught by Professor Nair during the Spring '11 term at St. John's.

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Chapter 1 - Chapter 1 The Challenge of Economics 1 Why cant we have everything we want a Our materialistic wants and desires continue to grow b Our

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