Chapter 1 - What is Economics?

The Science of Choice 

  • We glorify God when we learn to make wise use of the economic resources that He has given us dominion over. 

The Science of Economics

  • Economics is the common-sense science of how and why people, businesses, and governments make the choices they do. 

  • Economics is a science. 

  • Science always begins with observation. 

  • Scientists use their observations as a basis to predict future cause-and-effect relationships. 

  • Scientists can attempt to control future events through altering important variables. 

How and Why: Choices

  • People make many economic choices every single day. 

  • The Bible has much to say about the choices we make. 

  • Why are choices necessary? 

  • The struggle: unlimited wants and limited resources. 

  • Everyone has unlimited wants. 

  • How long would it take you to list yours? 

  • Everyone has limited resources. 

  • Scarcity: Resources are limited in quantity. 

  • Scarcity prevents us from obtaining everything we want.

  • Choices are necessary. 

  • Time  

  • Money 

  • Contentment: curbing unlimited wants and living with limited resources

  • Stewardship: using wisely and well what God has given you. 

  • A believer glorifies god when he makes wise choices with the limited, or scarce, resources that God has given him.

  • Economics

  • Origins are Greek! 

  • Oikos: house

  • Nomos: administration/management of 

  • The Bible often translates this word as “steward”. 

Intrinsic vs. Subjective Value 

  • The Diamond-water paradox 

  • Intrinsic value: a thing is valuable because of the nature of the product. 

  • Carl Menger, Principles of Economics

  • There is not just one economic value

  • Every Goods value differs from person to person. 

  • Subjective value: an object’s usefulness to the buyer determines its worth 

  • Utility- is it useful

  • The intrinsic value trap

Opportunity Cost & Choice

  • A rational person will make a decision by determining which choice’s anticipated satisfaction most exceeds the probable regret. 

  • Util: an economic term for an imaginary unit of satisfaction

  • Every decision has opportunity benefits and opportunity costs. 

  • Economics is often called a dismal science. 

  • Every decision involves some degree of regret. 

  • A Christian should look at opportunity benefits and costs differently than other people. 

The Scope and Purpose of Choice

  • Governmental interventions may result in beneficial outcomes or may create problems.  

  • mIcroeconomics: deals with choices made by individual units 

  • mAcroeconomics: examines large-scale economic choices and issues 

  • Positive economics: the approach of observing economic choices and predicting economic events. 

Normative economics: refers to making value judgments about existing or proposed economic policies