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Chapter 1 - Limits, Alternatives, and Choices

Chapter 1 - Limits, Alternatives, and Choices

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Published by mistress2mania
CHAPTER 1 ~ Limits, Alternatives, and Choices
CHAPTER 2 ~ The Market System and the Circular Flow
CHAPTER 3 ~ Demand, Supply, and Market Equilibrium
CHAPTER 1
limits, Alternatives, and Choices
(AD appeadA oa uadentaadlna gnphl Collowl thU chapter. If you need a qukk rniew of thiJ mathematical
tool. you might beDdt by r-tfagthe llplleDdh fim.)
People's wants are numerous and varied. Biologically, people need only air, water,
food, clothing, and shelter. But in modem society people also desire goods and services
that provide a more comfortable or affluent standard of living. We want bottled water,
soft drinks, and fruit juices, not just water from the creek. We want salads, burgers,
and pizzas, not just berries and nuts. We want jeans, suits, and coats, not just woven
reeds. We want apartments, condominiums, or houses, not just mud huts. And, as the
saying goes, "that is not the half of it,. We also want flat-panel TVs, Internet service,
education, cell phones, health care, and much more.
Fortunately, society possesses productive resources, such as labour and managerial
talent, tools and machinery, and land and mineral deposits. These resources, employed
in the economic system (or simply the economy), help us produce goods and services
that satisfy many of our economic wants. But the blunt reality is that our economic
wants far exceed the productive capacity of our scarce (limited) resources. We are
forced to make choices. This unyielding truth underlies the definition of economica,
which is the social science concerned with how individuals, institutions, and society
make optimal (best) choices under conditions of scarcity.
Numerous problems and issues arise from the challenge of making optimal choices
under conditions of scarcity. Although it is tempting to plunge into them. that sort of
anaiy5is must wait until we discuss some important preliminaries.
PART 1 .,. AN INTRODUCTION TO ECONOMICS AND THE ECONOMY
~ORIGIN1.1
\Si~ Economics
economics
The social science concerned
with how individuals, insliMions,
and society make optimal
(best) choices under
conditions of scarcily.
Economics is concerned with the
efficient use of scarce resources
to obtain the maximum satlsfacUon
of society's unlimited wants.
6... . FACING
• ., TRADEOFFS
6... . OPPORTUNITY
• ., COSTS
6..._ . CHOOSING A UTTLE
• ., MORE DR LESS
6... . THE INR.UENCE
• ., OF INCENTIVES
6... . SPECIAUZAmN
• ., &lRADE
6..._ .1 HE EFFECTNENESS
• ., OF MARKETS
6... . THE ROLE OF
• ., GOVERNMENTS
6.._.,. PRODLJCnON &
• ., 1HE STANDARD
OFUVJNG
6... . MONEY&
• ., INFLAmN
6.._-- INFLAmN-
• ., UNEMPLOYMENT
TRADEOFF
Ten Key Concepts to Retain for a Lifetime
Suppose you unexpectedly meet your introductory economics professor on the street five or ten years
after you romplete this course. What will you be able to tell her you retained from the course? More
than likely you will not be able to remember very much. To help you retain the main ideas that economics
has to offer, we have rome up with 10 key concepts we believe are essential to understand
the world around you and will help you in your chosen career. These key concepts will be reinforced
throughout the textbook so that you will hopefully retain them long after the course is over. When a
key concept is about to be discussed you will be alerted with an icon and the concept description.
The 10 key concepts are simply listed here; you will find elaboration on each key concept as we
progress through the textbook. At the end of the course you should review these 10 key concepts.
They will help you organize and better understand the materials you have studied. We have divided
the 10 key concepts into three categories: (a) concepts that pertain to the individual; (b) concepts
that explain the interaction among individuals; and (c) concepts that deal with the economy as a
whole and the standard ofliving.
The Individual
CONCEPT 1 ("Facing Tradeoffs"): Scarcity in relation to wants means you face tradeoffs; therefore,
you have to make cho
CHAPTER 1 ~ Limits, Alternatives, and Choices
CHAPTER 2 ~ The Market System and the Circular Flow
CHAPTER 3 ~ Demand, Supply, and Market Equilibrium
CHAPTER 1
limits, Alternatives, and Choices
(AD appeadA oa uadentaadlna gnphl Collowl thU chapter. If you need a qukk rniew of thiJ mathematical
tool. you might beDdt by r-tfagthe llplleDdh fim.)
People's wants are numerous and varied. Biologically, people need only air, water,
food, clothing, and shelter. But in modem society people also desire goods and services
that provide a more comfortable or affluent standard of living. We want bottled water,
soft drinks, and fruit juices, not just water from the creek. We want salads, burgers,
and pizzas, not just berries and nuts. We want jeans, suits, and coats, not just woven
reeds. We want apartments, condominiums, or houses, not just mud huts. And, as the
saying goes, "that is not the half of it,. We also want flat-panel TVs, Internet service,
education, cell phones, health care, and much more.
Fortunately, society possesses productive resources, such as labour and managerial
talent, tools and machinery, and land and mineral deposits. These resources, employed
in the economic system (or simply the economy), help us produce goods and services
that satisfy many of our economic wants. But the blunt reality is that our economic
wants far exceed the productive capacity of our scarce (limited) resources. We are
forced to make choices. This unyielding truth underlies the definition of economica,
which is the social science concerned with how individuals, institutions, and society
make optimal (best) choices under conditions of scarcity.
Numerous problems and issues arise from the challenge of making optimal choices
under conditions of scarcity. Although it is tempting to plunge into them. that sort of
anaiy5is must wait until we discuss some important preliminaries.
PART 1 .,. AN INTRODUCTION TO ECONOMICS AND THE ECONOMY
~ORIGIN1.1
\Si~ Economics
economics
The social science concerned
with how individuals, insliMions,
and society make optimal
(best) choices under
conditions of scarcily.
Economics is concerned with the
efficient use of scarce resources
to obtain the maximum satlsfacUon
of society's unlimited wants.
6... . FACING
• ., TRADEOFFS
6... . OPPORTUNITY
• ., COSTS
6..._ . CHOOSING A UTTLE
• ., MORE DR LESS
6... . THE INR.UENCE
• ., OF INCENTIVES
6... . SPECIAUZAmN
• ., &lRADE
6..._ .1 HE EFFECTNENESS
• ., OF MARKETS
6... . THE ROLE OF
• ., GOVERNMENTS
6.._.,. PRODLJCnON &
• ., 1HE STANDARD
OFUVJNG
6... . MONEY&
• ., INFLAmN
6.._-- INFLAmN-
• ., UNEMPLOYMENT
TRADEOFF
Ten Key Concepts to Retain for a Lifetime
Suppose you unexpectedly meet your introductory economics professor on the street five or ten years
after you romplete this course. What will you be able to tell her you retained from the course? More
than likely you will not be able to remember very much. To help you retain the main ideas that economics
has to offer, we have rome up with 10 key concepts we believe are essential to understand
the world around you and will help you in your chosen career. These key concepts will be reinforced
throughout the textbook so that you will hopefully retain them long after the course is over. When a
key concept is about to be discussed you will be alerted with an icon and the concept description.
The 10 key concepts are simply listed here; you will find elaboration on each key concept as we
progress through the textbook. At the end of the course you should review these 10 key concepts.
They will help you organize and better understand the materials you have studied. We have divided
the 10 key concepts into three categories: (a) concepts that pertain to the individual; (b) concepts
that explain the interaction among individuals; and (c) concepts that deal with the economy as a
whole and the standard ofliving.
The Individual
CONCEPT 1 ("Facing Tradeoffs"): Scarcity in relation to wants means you face tradeoffs; therefore,
you have to make cho

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Published by: mistress2mania on Jan 21, 2012
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