Chapter 1 Summary

Chapter 1 Summary - Chapter 1 Summary All economic analysis...

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Unformatted text preview: Chapter 1 Summary- All economic analysis is based on a list of basic principles. These principles apply to three levels of economic understanding. First, we must understand how individuals make choices; second, we must understand how these choices interact; and third, we must understand how the economy functions overall.- Everyone has to make choices about what to do and what not to do. Individual choices is the basis of economics – if it does not involve choices, it is not economics.- The reason choices must be made is that resources – anything that can be used to produce something else – are scarce. Individuals are limited in their choices by money and time; economies are limited by their supplies of human and natural resources.- Because you must choose among limited alternatives, the true cost of anything is what you must give up to get it - all costs are opportunity costs.- Many economic decisions involve questions not of “whether” but of “how much” – how much to spend...
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