Economics: The Study of Choice
Read this chapter to learn about the economic way of thinking and the principles of scarcity and opportunity cost. Be sure to click through each of the sections. Note how individuals and businesses make everyday decisions at the margin. Learn about the differences between macroeconomics and microeconomics.
1.1 Defining Economics
- Economics is a social science that examines how people choose among the alternatives available to them.
- Scarcity implies that we must give up one alternative in selecting another. A good that is not scarce is a free good.
- The three fundamental economic questions are: What should be produced? How should goods and services be produced? For whom should goods and services be produced?
- Every choice has an opportunity cost and opportunity costs affect the choices people make. The opportunity cost of any choice is the value of the best alternative that had to be forgone in making that choice.