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1: Welcome to Economics!

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  • This leads us to the topic of this chapter, an introduction to the world of making decisions, processing information, and understanding behavior in markets —the world of economics. Each chapter in this book will start with a discussion about current (or sometimes past) events and revisit it at chapter’s end—to “bring home” the concepts in play.

    • 1.1: What Economics Is and Why It's Important
      Economics is the study of how humans make decisions in the face of scarcity. These can be individual decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see that scarcity is a fact of life. Scarcity means that human wants for goods, services and resources exceed what is available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and services we want but they exist in limited supply.
    • 1.2: How Economists Use Theories and Models to Understand Economic Issues
      Economists analyze issues and problems with economic theories that are based on particular assumptions about human behavior, that are different than the assumptions an anthropologist or psychologist might use. A theory is a simplified representation of how two or more variables interact with each other. Sometimes economists use the term model instead of theory. Strictly speaking, a theory is a more abstract representation, while a model is more applied or empirical representation.
    • 1.3: How Economies Can Be Organized- An Overview of Economic Systems
      Historically, societies have found several ways to organize themselves economically.  In this section you will learn generally about three ways societies have found to organize an economy. The first is the traditional economy, which is the oldest economic system and can be found in parts of Asia, Africa, and South America. Command economies are very different. In a command economy, economic effort is devoted to goals passed down from a ruler or ruling class. Market economies have a very decentra