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Social Sci LibreTexts

1: Overview

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    287581

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    Learning Objectives

    Upon completion of this module, you will be able to:

    • Describe the science of economics.
    • Use the supply and demand to explain economic relationships and the consequences of surpluses and shortages.
    • Explain the production possibilities curve and how it represents the opportunity costs associated with production decisions.
    • Use the production possibilities curve to illustrate and distinguish between the concepts of scarcity, law of increasing opportunity cost, inefficiency, unemployment, and economic growth.
    • Recount some of the market failures of the market mechanism as well as the government failures associated with government directives.
    • Recount the benefits to society that result from a free market economy.

    • 1.1: What is Economics?
      This page demystifies economics by focusing on choice as its central concept. It emphasizes that everyone, regardless of knowledge, makes choices daily that involve costs, reinforcing that no choice is free. By understanding this principle, individuals can recognize the universal nature of economics and its relevance to daily life, rather than viewing it as a daunting subject.
    • 1.2: Scarcity and Choices
      This page discusses scarcity as the limitation of resources that necessitates making choices with associated costs. It highlights opportunity cost, which represents the value of the best alternative that is not chosen. An example is pursuing an MBA, where costs include not only tuition but also lost earnings. Understanding opportunity costs improves decision-making by factoring in both financial and time-related trade-offs.
    • 1.3: The Economy
      This page discusses economics as the study of choice, differentiating microeconomics and macroeconomics. It emphasizes the importance of understanding individual and group decision-making, measuring costs and benefits, and how changes in choices impact behavior and economic activity, showcasing the dynamic nature of decisions in the economy.
    • 1.4: Production Possibilities
      This page explains that scarcity is fundamental to production, which depends on land, physical capital, labor, and entrepreneurship. These resources often have limited availability, necessitating tough decisions about their allocation.
    • 1.5: Reality Shot
      This page explains that measuring opportunity cost goes beyond monetary terms, emphasizing the importance of considering income levels. It highlights that increased spending can misrepresent opportunity costs if income rises simultaneously. The concept is illustrated using U.S. military spending, where a larger budget doesn't imply a higher opportunity cost compared to historical spending, suggesting that relative income allocation is crucial for accurate assessment.

    This page titled 1: Overview is shared under a CC BY-NC-SA 4.0 license and was authored, remixed, and/or curated by Martin Medeiros.