Scarcity and choice All resources are scarce, and we have infinite wants To get one thing, we must

sacrifice another This is opportunity cost Rationality People want to maximize utility People will exhibit self-interested behavior Marginalism Marginal analysis: The study of the next or additional Why study the next one? The ones in the past are already done The only one left is the one that is about to happen We need to see how much this next one will get us in order to see if we should spend the money to acquire it Theories in Economics Generalizations Economic facts are too diverse for singular assumptions and calculations We look at the entire economy instead Ceteris Paribus All other things being equal Can only change one variable at a time Abstractions Basic and simplified models Economic goals