MACROECONOMICS: What Is Economics?

Scarcity: The fundamental economic problem arising from our inability to satisfy all our wants because we desire more than we can get.
Choices: Because of scarcity, individuals, businesses, and governments must make choices.
Incentives: These are rewards that encourage an action or penalties that discourage an action. Choices are influenced by the incentives faced.
Economics Defined: The social science that examines the choices made by individuals, businesses, governments, and entire societies in their efforts to cope with scarcity, and how these choices are influenced and reconciled by incentives.
Divisions of Economics:
- Microeconomics: The study of choices made by individuals and businesses, how these choices interact in markets, and the role of government influence.
  - Example Question: Why are people downloading more movies? Would a tax on downloads alter the number of movies downloaded?
- Macroeconomics: The study of the overall performance of national and global economies.
  - Example Question: Why does the unemployment rate fluctuate?

These questions summarize the entire scope of economics:
1. How do choices ultimately determine what, how, and for whom goods and services are produced?
2. When do choices made in the pursuit of self-interest also promote the social interest?

Goods and Services: These are the items people value and produce to satisfy human wants.
- What is Produced? The composition of production varies significantly across countries.
  - United States: Agriculture is less than 1\% of total production, manufactured goods 19\% , and services 80\% .
  - Ethiopia (low-income): Agriculture is 36\% , manufactured goods 17\% , and services 47\% .
  - These patterns of production are determined by the choices made within each economy.
How are Goods and Services Produced? This involves the utilization of productive resources, known as factors of production.
- Factors of Production:
  - Land: Natural resources, or