Economics as a science

The purpose: Review the major aspects of the economics, its scope and method

Key words: economics, method, study, opportunity cost, marginalism, efficient markets, industrial revolution, normative economics, positive economics

Questions:

1.1Why Study Economics?

1.2 The Scope of Economics

1.3 The Method of Economics

1.4 Appendix: How to Read and Understand Graphs

Why Study Economics?

Economics. The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. The key word in this definition is choose. Economics is a behavioral, or social, science. In large measure, it is the study of how people make choices. The choices that people make, when added up, translate into societal choices.

Three fundamental concepts:

§ Opportunity cost

§ Marginalism

§ Efficient markets

Opportunity cost. The best alternative that we forgo, or give up, when we make a choice or a decision(scarce Limited).

Marginalism. The process of analyzing the additional or incremental costs or benefits arising from a choice or decision (sunk costs. Costs that cannot be avoided because they have already been incurred.).

Efficient market. A market in which profit opportunities are eliminated almost instantaneously.

Industrial Revolution. The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities.

An understanding of economics is essential to an understanding of global affairs. To be an informed citizen requires a basic understanding of economics.