ECON 112_Lecture notes_Ch 1

Chapter Overview

• Title: Chapter 1: What Economics Is All About

• Authors: Philip Mohr and Associates

• Context: Economics as a study of human behavior and interactions in everyday life.

• Quote: "Economics is a study of mankind in the ordinary business of life." - Alfred Marshall

Learning Outcomes

Upon studying this chapter, you should be able to:

1. Explain what economics is all about.

2. Define economics.

3. Define the important concept of opportunity cost.

4. Describe a production possibilities curve (PPC) or frontier.

5. Distinguish between microeconomics and macroeconomics.

6. Distinguish between positive and normative economics.

7. Explain why economics is a social science.

8. Identify some common mistakes in reasoning about economics.

Introduction to Economics

• Importance of Economics

  • Economics is increasingly recognized as vital in understanding both individual and societal decision-making processes.

  • Many misconceptions exist regarding the true scope of economics.

• Common Misconceptions

  • Some believe economics solely relates to profit, stock exchanges, or financial statements.

  • These views are overly simplistic and fail to encompass the broader aspects of economics.

Defining Economics

• Human Existence: Economics fundamentally relates to human existence and interaction.

  • Economic principles can be illustrated through various examples that reflect daily choices and societal issues.

• The chapter will explore key concepts such as scarcity, choice, and opportunity cost using a production possibilities curve.

Key Economic Concepts

• Scarcity: A central theme in economics; it emphasizes limited resources against infinite wants.

• Choice: The necessity to make decisions due to scarcity.

• Opportunity Cost: The cost of the next best alternative that must be forgone when making a choice.

  • Understanding opportunity cost is crucial for making informed economic decisions.

Production Possibilities Curve (PPC)

• A tool to illustrate the trade-offs and opportunity costs associated with different choices.

• Will be discussed in relation to various economic scenarios to emphasize its utility in understanding economics.