Economics is about individual choice.

Individual Choice Economics – The social science concerned with the efficient use of limited or scarce resources to achieve maximum satisfaction of human economic wants. Economics is the study of scarcity and choice. Every economic issue involves, at its most basic level individual choice

Resources are Scarce Resources: Land – including timber, water, minerals, and all other resources that come from the land. Labor – The effort of workers Capital – Machinery, buildings, tools, and all other manufactured goods used to make other goods and services Entrepreneurship – The one who takes a risk to go in business for themselves to earn a profit.

Wants and Needs What are examples of wants? What are examples of needs?

Wants and Needs Want – Limitless and varied – Things that are not necessary for survival but you would like to have. Needs – Something that is necessary for survival. Examples: Air, water, shelter, food

Economic Resources are limited/scarce Scarcity requires that choices be made. Choices imply that things are given up. What about free stuff? There is no such thing as a free lunch

Opportunity Cost The real cost of something is what you must give up to get it. If you have $100 to spend on either a digital camera or running shoes and you purchase the running shoes, what is your opportunity costs? (the digital camera)

Positive Economics Economic analysis involves questions having a definite right or wrong answer. Questions about how the world works. Statements of “what is” or “what will be” No value judgments are applied - Questions about facts. Example: How much revenue will the toll roads yield? How much would the revenue increase if the toll were raised from $1.00 to $1.50?

Normative Economics Economic analysis that involves saying how the world should work. Should the toll be raised, bearing in mind that a toll increase would likely reduce traffic and air pollution near the road but impose some financial hardship on frequent commuter? These involve value judgments of what is “right,” “wrong,” or “best.”