Naked Economics Chapter 1 Summary
Chapter 1: Economics and Economic Reasoning
What Economics Is: * Economics- the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society * Coordination- how the three central problems facing any economy are solved * The Three Central Problems of Economics Include * What, and how much, to produce * How to produce it * For whom to produce it * Scarcity- the goods available are too few to satisfy individuals desires
Scarcity: * Scarcity has 2 Elements: our wants and our means of fulfilling those wants * The degree of scarcity is constantly changing * An economy deals with scarcity through COERCION * …show more content…
Opportunity Cost * Opportunity cost- is the benefit that you might have gained from choosing the next-best alternative
Economic and Market Forces * Economic forces- the necessary reactions to scarcity * Market force- economic force that is given relatively free rein by society to work through the market * Ration by changing prices * When there is a shortage the price goes up * When there is a surplus price goes down * The invisible hand- the price mechanism (the rise and fall of prices guide our actions in a market) * Economic Reality- controlled by Social, cultural and political forces * Often Social and Political Forces work against the invisible hand * The invisible hand ensures that the quantity supplied equal the quantity demanded at some price * Countries laws and social norms determine whether the invisible hand will be allowed to work * What happens in a society can be seen as the reaction to, and interaction of, these three forces: economic forces, political and legal forces, and social and historical forces
Economic Insights * Abduction- method of analysis that uses a combination of inductive methods and deductive
What Economics Is: * Economics- the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society * Coordination- how the three central problems facing any economy are solved * The Three Central Problems of Economics Include * What, and how much, to produce * How to produce it * For whom to produce it * Scarcity- the goods available are too few to satisfy individuals desires
Scarcity: * Scarcity has 2 Elements: our wants and our means of fulfilling those wants * The degree of scarcity is constantly changing * An economy deals with scarcity through COERCION * …show more content…
Opportunity Cost * Opportunity cost- is the benefit that you might have gained from choosing the next-best alternative
Economic and Market Forces * Economic forces- the necessary reactions to scarcity * Market force- economic force that is given relatively free rein by society to work through the market * Ration by changing prices * When there is a shortage the price goes up * When there is a surplus price goes down * The invisible hand- the price mechanism (the rise and fall of prices guide our actions in a market) * Economic Reality- controlled by Social, cultural and political forces * Often Social and Political Forces work against the invisible hand * The invisible hand ensures that the quantity supplied equal the quantity demanded at some price * Countries laws and social norms determine whether the invisible hand will be allowed to work * What happens in a society can be seen as the reaction to, and interaction of, these three forces: economic forces, political and legal forces, and social and historical forces
Economic Insights * Abduction- method of analysis that uses a combination of inductive methods and deductive