01.02 What Is Economics?

Applying the Three Questions

Applying the Three Questions The three basic economic questions are relevant for business and nations. They also apply in your own home. Let's look at these examples of the three questions applied to an individual and to a business: Individual: Have you ever prepared dinner for your family? You chose: what to produce—maybe spaghetti. how to produce it—following label directions, what tools and sauce to use, and how to present it. who would benefit from your excellent cooking skills and how much they would benefit (as in, how much spaghetti you put on the plate). Business: What if you open your own restaurant? As a business owner you would also decide: what to produce—maybe a variety of Japanese foods. how to produce it—maybe obtain a loan to purchase property and machinery for food production, hire workers to cook, serve, and clean, choose food companies to order supplies from, and so on. for whom to produce—determining your targeted clientele. Maybe you would like a casual atmosphere that attracts families and young couples and so you decorate and advertise accordingly.

Economic Terms and Descriptions

Macroeconomics = the study of national and global economy Basic Economic Questions = What to produce? How to produce? For whom to produce? Economic Products = goods and services Economist = a person who studies economics Economics = the study of how people get the economic products they need and want Personal Income = something you might study in microeconomics National Income Tax = something you might study in macroeconomics

Goods and Services

We are all consumers of economic products. Goods are the physical items created by people to be used right away. Gas and fast food are goods, like your computer and mp3 player. Services are the valuable actions supplied by other people. The person who took the drive-through order and the person who assembled the lock on your door provided a service. Did You Know? Economics is the study of how people get the goods and services they need and want. It is not just about money, although money does play a significant role. Economics is about the choices we make every day.

Macroeconomics and Microeconomics

We can study macroeconomics, which looks at the big picture of communities, nations, and global decision making. We can also study microeconomics, which looks at the smaller picture of individuals and businesses. In this course, you will study some of both to prepare you to make better decisions throughout your life. Let's classify these items as either macroeconomics or microeconomics: buying a bottle of shampoo microeconomics decreasing funding for national parks macroeconomics increasing the national minimum wage macroeconomics starting a lawn-mowing business microeconomics nations volunteering to end world hunger macroeconomics painting your bedroom microeconomics having a yard sale microeconomics importing goods from other nations macroeconomics

Three Economics Questions

Whether looking at the big picture or the small, economists seek to answer these three questions: What will be produced? How will it be produced? For whom will it be produced?