Chapter 1 (Section 1)

Free Good

A free good is one for which the choice of one use does not require that we give up another. One example of a free good is gravity.

Economics

Economics is a social science that examines how people choose among the alternatives available to them.

Takeaways

Economics is a social science that examines how people choose among the alternatives available to them.

Takeaways

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.

Every economy must answer what three questions?

Every economy must determine what should be produced, how it should be produced, and for whom it should be produced.

Opportunity Cost

Opportunity cost is the value of the best alternative forgone in making any choice. Ex: If you choose to spend $20 on a potted plant, you have simultaneously chosen to give up the benefits of spending the $20 on pizzas or a paperback book or a night at the movies.

Takeaways

Scarcity implies that we must give up one alternative in selecting another. A good that is not scarce is a free good.

Scarcity

Scarcity is the condition of having to choose among alternatives. A scarce good is one for which the choice of one alternative requires that another be given up.

Concepts of scarcity, choice, and opportunity...

The concepts of scarcity, choice, and opportunity cost are at the heart of economics. A good is scarce if the choice of one alternative requires that another be given up. The existence of alternative uses forces us to make choices. The opportunity cost of any choice is the value of the best alternative forgone in making it.

Takeaways

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?