Scarcity, Choices, and the Scope of Economics

Core definition: scarcity exists because humans have unlimited wants but face limited resources.
- Shorthand often written as: \text{Unlimited Wants} \; &>\; \text{Limited Resources}
Consequence: because we cannot satisfy every want, choices must be made.
- Scarcity underlies every economic question, decision, or model.
Applies to all economic actors:
- Individuals (e.g.
- Want both new jeans and new shoes; budget may only cover one.)
- Businesses (e.g.
- Need to hire 3 employees but only have funds for 1; must pick the single best worker.)
- Countries (e.g.
- Allocate limited tax revenue across defense, education, healthcare, etc.)
Scarcity is the unifying theme that explains why economics is necessary in the first place.

Because scarcity forces decisions, economists study choices.
Any choice entails a trade-off; what you give up is the opportunity cost.
- Classroom illustration: AP Literature vs AP Calculus vs AP Macroeconomics offered the same period.
- Students must pick only one (or none).
- Whatever course they reject becomes the opportunity cost of the one they select.
- Purchasing example: Choosing jeans or shoes when funds cover just one item.
- Hiring example: Firm choosing 1 “super-employee” instead of 3 average employees.
Key takeaway: identify and measure what is sacrificed whenever a decision is made.

Often classified as a social science because it studies human behavior under conditions of scarcity.
Combines:
- Descriptive analysis (what people/businesses/countries actually do).
- Prescriptive analysis (what they should do to achieve objectives).
Relies roughly 50 % quantitative tools (graphs, statistics, models) and 50 % qualitative reasoning (ethics, psychology, sociology).

Microeconomics ("micro = small")
- Focus: individuals, households, single firms, specific markets.
- Sample topics: pricing strategies, consumer choice, labor decisions in one company.
- Example headline from class: “Sears reports rough holiday sales.”
Macroeconomics ("macro = large/aggregate")
- Focus: economy-wide aggregates—GDP, unemployment, inflation, overall growth.
- Example headlines:
- “America finally gets a raise: U.S. economy added 200{,}000 jobs in January.”
- “Asian shares tumble after the Dow has its worst day since 2011.”
- State-level or national economies (e.g. the economy of Ohio) are treated as macro units.
Unit 1 of the course will include both micro elements (markets, individuals) and macro perspectives (aggregate outcomes).

Scarcity & choice framework is the lens through which students should view:
- Personal budgeting decisions (college, time management, leisure).
- Business strategy (hiring, expansion, product mix).
- Public policy (tax allocation, stimulus, regulation).
Classroom logistics reinforce scarcity:
- Limited schedule blocks cause course conflicts.
- Limited school resources (e.g. Chromebooks) must be distributed—announcement to pick them up illustrates allocation under scarcity.

Scarcity: condition of unlimited wants & limited resources.
Choice: selection among alternatives prompted by scarcity.
Opportunity Cost: highest-valued foregone alternative when a choice is made.
Microeconomics: study of decisions of individual units (people, firms, markets).
Macroeconomics: study of aggregate economy-wide phenomena (GDP, employment, inflation).