Chapter 1 - What is Economics

Chapter 1 - What is Economics - WH AT I S ECONOM I CS? 1 CH...

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Unformatted text preview: WH AT I S ECONOM I CS? 1 CH APTE R Reading You should read Ch. 1 on your own. It is mainly descriptive I will go throught it very quickly in class most of the slides are from the text. Definition of Economics Scarcity All economic questions arise because we are unable to satisfy all our wantsbecause we face scarcity . Every decision maker must maximize resources to cope with constraints We have to make tradeoffs. Financial Constraints, Technological Constraints Economics studies the choices that individuals, businesses, governments, and societies make as they cope with scarcity. Definition of Economics Microeconomics Microeconomics is the study of choices made by individuals and businesses, and the influence of government on those choices. Macroeconomics (Current Economic Crisis) Macroeconomics is the study of the effects on the national and global economy of the choices that individuals, businesses, and governments make. Three Big Microeconomic Questions Microeconomics seeks to understand what determines: What goods and services are produced How goods and services are produced For whom goods and services are produced Goods and services are the objects that people value and produce to satisfy wants. Three Big Microeconomic Questions Figure 1.1 What goods and services are produced? Compositional change as economies progress over time. Three Big Microeconomic Questions Figure 1.2 Trends Three Big Microeconomic Questions How are Goods and Services Produced? Factors of production are the resources that businesses use to produce goods and services. They are grouped into four categories: Land Labor Capital Entrepreneurship (provides vision for company, invests initial capital) Technology (not a factor, but still important) Three Big Microeconomic Questions The tools, instruments, machines, buildings, and other constructions that are used to produce goods and services are capital ....
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Chapter 1 - What is Economics - WH AT I S ECONOM I CS? 1 CH...

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