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Chapter 1 - Limits, alternatives, and choices. This chapter introduces many of the fundamental concepts in economics, and we cover a wide variety of concepts. We start with the definition of economics; then we will discuss the economic perspective. Then the discussion moves to the development of economic theory. | Chapter 1 Limits, Alternatives, and Choices Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin This chapter introduces many of the fundamental concepts in economics, and we cover a wide variety of concepts. We start with the definition of economics; then we will discuss the economic perspective. Then the discussion moves to the development of economic theory. The individual’s and society’s economizing problems are discussed using a budget line and production possibilities curves to address these problems. Economic growth is addressed, and in the Last Word we will discuss common mistakes students make when thinking about economics. LO1 Introduction Economics defined: Economic wants exceed productive capacity. A social science concerned with making optimal choices under conditions of scarcity. 1- If wants didn’t exceed our productive capacity, everyone could have everything that they ever wanted and this class wouldn’t exist. Since we can’t get everything that we want, we have to make choices. The choices that we make are the best options available given the circumstances. Every choice that is made has an impact on the economy. Being in this class right now impacts the economy. LO1 The Economic Perspective Thinking like an economist Key features: Scarcity and choice Purposeful behavior Marginal analysis 1- The economic perspective is essentially the lens that economists use to view the world. This lens includes three parts. LO1 Scarcity and Choice Resources are scarce Choices must be made Opportunity cost There’s no free lunch 1- If resources weren’t scarce, we wouldn’t have to make choices. Because we have to make choices, there is a cost to every choice and that’s called “opportunity cost.” This is where the phrase “There’s no such thing as a free lunch” comes from. What did you give up to be in this class? What would you be doing if you weren’t in class right now? It’s important to note that . | Chapter 1 Limits, Alternatives, and Choices Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin This chapter introduces many of the fundamental concepts in economics, and we cover a wide variety of concepts. We start with the definition of economics; then we will discuss the economic perspective. Then the discussion moves to the development of economic theory. The individual’s and society’s economizing problems are discussed using a budget line and production possibilities curves to address these problems. Economic growth is addressed, and in the Last Word we will discuss common mistakes students make when thinking about economics. LO1 Introduction Economics defined: Economic wants exceed productive capacity. A social science concerned with making optimal choices under conditions of scarcity. 1- If wants didn’t exceed our productive capacity, everyone could have everything that they ever wanted and this class wouldn’t exist. Since we
