Chapter 1: Introduction:
What is Economics?
Many students entering an economics class have an idea that they will be studying how to make
money, or at least that the key issue in economics concerns money. This is largely because in a
modern society, many economic activities involve market exchanges – the purchase of things for
money. It may surprise you, however, to learn that I will insist that you not use the word money in
the class. This is because I want you to keep your eyes on what is really happening and to be
precise in discussing it.
So what is Economics? A simple, direct, definition is that Economics is a social and behavioral
science concerning people’s use of resources. In this section I will explain each part of this
definition to help you understand what economists study and the approach they use. As I
discuss in the section
Why Study Economics?
the principles and techniques of this approach
are valuable in understanding and decision making beyond economics in a varieties of arenas
you might want to master in your professional or personal life. I will also point out how economics
relates to other subjects you are studying: sociology, math, psychology, writing, to name just a
Resources and Scarcity
Resources are things that are used to produce the goods and services we use in living our lives.
For example, the cup of coffee I am probably drinking as I write has required fertile soil, coffee
bushes, water, human labor, drying equipment, warehouses, ships, roasters, grinders, energy
resources and and the work of a very nice barrista to arrive in my hands. Even the service of
tidying up my house (which I may or may not have done before getting down to the business of
writing this chapter) required resources, namely my ‘time,’ efforts and paltry skills, to be done.
The amount of resources that exist determines the amount of goods and services we can
produce and therefore consume. In our dreams, we can imagine a tropical paradise where we
have so many resources that we can have everything we might possibly want. We could pick our
food from trees, take a swim for fun, drink from a spring and sleep under the palm trees. Don’t
worry, be happy. Even as you imagine this you may think, “What about a nice beach cabana ?”
or “In my dreams I would be served served grilled fish and rum punch.” I would even bet that
you are feeling a little twitching in your texting fingers. Paradise would indeed have to have cell
phones and music and people who wait on me, wouldn’t it? Since these do not grow on trees or