Economics, Scarcity, and Choice Economics: is the study of choice under conditions of scarcity Scarcity: a situation in which the amount of something available is insufficient to satisfy the desire for it. - time and purchasing power are scarce As individual’s, we face a scarcity of time and spending power. Given more of either, we could have more of the goods and services that we desire.Resources: the land, labor, and capital that are used to produce goods and services- scarcelabor – the time human beings spend producing goods and servicescapital – long lasting tools used in producing goods and servicesphysical capital: buildings, machinery, equipmenthuman capital: skills and training workers possessland – the physical space on which production occurs, and the natural resources that come with itAs a society, our resources, land, labor, and capital, are insufficient to produce all the goods and services we might desire. In other words, society faces a scarcity of resources. Raw material – not long lasting toolEx. ChalkWhat to produce?How much to produce?How to produce it?The World of EconomicsMicroeconomics: the study of the behavior of individual households, firms, and governments; the Choices they make; and their interaction in specific marketsWhat happens to the cost of movie tickets over the next five years?How many jobs will open up in the fast-food industry?Macroeconomics: the study of the economy as a wholeLumps all goods and services together and looks at the economy’s total outputPositive economics: the study of what is, of how the economy works (deals with the facts)Ex. If we lower income tax rates in the U.S. next year, will the economy grow faster? If so, by how much? What effect will it have on total employment?Normative economics: the study of what should be; it is used to make value judgments, identify Problems, and prescribe solutions.Normative analysis is bas...
