Lecture_Notes_1 - CHAPTER INTRODUCTION 1 INTRODUCTION What...

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INTRODUCTION CHAPTER 1
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INTRODUCTION What is Economics Economic Models
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INTRODUCTION All individuals and households have some basic needs and wants. These needs and wants are insatiable or unlimited. That is, our needs and wants are so many that we cannot possibly satisfy them all. It is almost impossible to satisfy all our needs and wants, at any given time, because the resources needed to satisfy them are scarce or limited in supply.
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INTRODUCTION Take for example, the two basic resources - time and money. It is virtually impossible to have enough money and or time to do all the things that we wish to accomplish at any given point in time. The problem of scarcity of resources needed to satisfy unlimited needs and wants, exits at the individual level, at the household level, as well as at the societal level.
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INTRODUCTION Since it is impossible to satisfy all our needs and wants with the resources we have, at any given point in time, how do we then as individuals, households and as a society, manage our limited or scarce resources to satisfy our most basic needs and wants?
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INTRODUCTION The solution to the problem of scarcity is to prioritize or choose the most important of our needs and wants to the extent that our scarce resources can satisfy them. But making these choices requires that we give up or sacrifice those things that we cannot afford to have or what we consider as less important. The value (or the cost) of the choices we make can be expressed in terms of the alternatives we decided to forgo.
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OPPORTUNITY COST The cost of any choice is the option or options that a person gives up. For example, if you gave up the option of playing a computer game to read this text, the cost of reading this text is the enjoyment you would have received playing the game. Most of economics is based on the simple idea that people make choices by comparing the benefits of option A with the benefits of option B (and all other options that are available) and choosing the one with the highest benefit.
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OPPORTUNITY COST Since our resources are limited, the efficient use of these resources to satisfy the most important needs and wants can have a positive impact on the quality of lives of individuals, households or society. The efficient allocation of scarce resources to satisfy the most important needs and wants that are likely to improve the quality of life is the main objective of the study of Economics.
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OPPORTUNITY COST Economics is the social science which examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants.
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MAIN BRANCHES OF ECONOMICS BRANCHES The field of economics is broken down into two distinct areas of study:
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Lecture_Notes_1 - CHAPTER INTRODUCTION 1 INTRODUCTION What...

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