Economics, 11th Edition

CHAPTER 1 Introduction to Economics

CHAPTER OBJECTIVES

• Define economics, scarcity and choice, opportunity cost, efficiency, and equity.
• Identify the four factors of production and the income return to each type of factor.
• Differentiate between economic theory and economic policy, and discuss the components of model building.
• Define the tools economists use to express theories and policies.
• Use the production possibilities model to illustrate scarcity and model building.
• Define the differences between the study of macroeconomics and microeconomics.
• Explain how to construct a graph and interpret the illustrated relationship.

WHAT IS ECONOMICS?

We are always making choices. We constantly choose how to spend our time and our money. We make simple choices like whether to take the time to eat lunch rather than work or whether to spend money for bottled water rather than drink from a water fountain. We make complex choices about careers, where to live, and colleges. And, as members of society, we make choices about voting, supporting public policy issues, recycling, and volunteering to clean up the local park.

Choices are a part of everyday life because our wants exceed our ability to satisfy them. You may want to achieve a high grade point average (GPA) and maintain a job that gives you enough money for clothes, a car, and decent housing during a semester that does not provide enough time for both. People in a community may want a recreation complex, street repairs, an ambulance, ...