Chapter 1 (Section 3)

Three features distinguish the economic approach

1. Economists give special emphasis to the role of opportunity costs in their analysis of choices. 2. Economists assume that individuals make choices that seek to maximize the value of some objective, and that they define their objectives in terms of their own self-interest. 3. Individuals maximize by deciding whether to do a little more or a little less of something. Economists argue that individuals pay attention to the consequences of small changes in the levels of the activities they pursue.

Takeaway

A wide range of career opportunities is open to economics majors. Empirical evidence suggests that students who enter the job market with a major in economics tend to earn more than do students in most other majors. Further, economics majors do particularly well on the LSAT.

Food for thought

Economists argue that most choices are made "at the margin." The margin is the current level of an activity. Think of it as the edge from which a choice is to be made. A choice at the margin is a decision to do a little more or a little less of something.

Food for thought

Economists assume that individuals make choices that they expect will create the maximum value of some objective, given the constraints they face.

Takeaway

Economists focus on the opportunity costs of choices, they assume that individuals make choices in a way that maximizes the value of an objective defined in terms of their own self-interest, and they assume that individuals make those choices at the margin.

The Ecnomic Way of Thinking:

Economists study chocies that scarcity requires us to make.

Microeconomics & Macroeconomics

Microeconomics is the branch of economics that focuses on the choices made by individual decision-making units in the economy—typically consumers and firms—and the impacts those choices have on individual markets. Macroeconomics is the branch of economics that focuses on the impact of choices on the total, or aggregate, level of economic activity.

Food for thought

The elements of opportunity cost, maximization, and choices at the margin can be found in each of two broad areas of economic analysis: microeconomics and macroeconomics.

Food for thought

The emphasis on opportunity costs is an emphasis on the examination of alternatives.