Chapter 1 - Limits, Alternatives, and Choices

Scarcity

The limits placed on the amounts and types of goods and services available for consumption as the result of there being only limited economic resources from which to produce output *Because we cannot have it all, we must decide what we will have and what we must forgo. (LIMITED GOODS AND SERVICES)

Utility

The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the consumption of a good or service (or from the consumption of a collection of goods and services).

At the core of economics is the idea that "there is no free lunch"

You may be treated to lunch, making it "free" from your perspective, but someone must bear the cost. -The scarce inputs involved in creating the lunch include land, equipment, and farm labor. -The scarce resources that are used to produced the "free goods" have alternative uses that are given up

Economic Perspective

a viewpoint that envisions individuals and institutions making rational decisions by comparing marginal benefits and marginal costs associated with their actions.

The economic perspective focuses largely on marginal analysis:

comparisons of marginal benefits and marginal costs, usually for decision making. Marginal means "extra, additional, or a change in"

Purposeful Behavior

people make decisions with some desired outcome in mind.

Opportunity Cost

the amount of other products that must be forgone or sacrificed to product a unit of a given product. *the loss of potential gain from other alternatives when one alternative is chosen.