The Art and Science of Economic Analysis
THIS CHAPTER HAS TWO PURPOSES: TO INTRODUCE STUDENTS TO SOME OF THE BASIC LANGUAGE OF ECONOMICS AND TO STIMULATE STUDENT INTEREST IN THE SUBJECT. IT CONVEYS TO STUDENTS THAT ECONOMICS IS NOT ONLY FOUND IN THE FINANCIAL SECTION OF THE NEWSPAPER, BUT ALSO IS VERY MUCH A PART OF THEIR EVERYDAY LIVES. BEGINNING WITH THE ECONOMIC PROBLEM OF SCARCE RESOURCES BUT UNLIMITED WANTS, THIS CHAPTER PROVIDES AN OVERVIEW OF THE FIELD AND THE ANALYTICAL TECHNIQUES USED. CONCEPTS INTRODUCED INCLUDE: RESOURCES, GOODS AND SERVICES, THE ECONOMIC ACTORS IN THE ECONOMY, AND MARGINAL ANALYSIS. TWO MODELS FOR ANALYSIS, THE CIRCULAR FLOW MODEL AND STEPS OF THE SCIENTIFIC METHOD, ARE INTRODUCED. THE APPENDIX INTRODUCES THE USE OF GRAPHS.
THE ECONOMIC PROBLEM: SCARCE RESOURCES, UNLIMITED WANTS
Use PowerPoint slide 3 for the following section
Economics is about making choices. The problem is that wants or desires are virtually unlimited while the resources available to satisfy these wants are scarce. A resource is scarce when it is not freely available, when its price exceeds zero. Economics studies how people use their scarce resources in an attempt to satisfy their unlimited wants.
Use PowerPoint slides 4-9 for the following sections
Resources: The inputs, or factors of production, used to produce the goods and services that humans want. Resources are divided into four categories:
1. Labor: Human effort, both physical and mental
• Physical capital: Manufactured items (tools, buildings) used to produce goods and services.
• Human capital: Knowledge and skills people acquire to increase their labor productivity.
3. Natural resources: gifts of nature, bodies of water, trees, oil reserves, minerals and animals.
These can be renewable or exhaustible.
4. Entrepreneurial ability: The imagination required to develop a new product or process, the skill needed... [continues]
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