Chapter 1: Introduction to Economics
1. What is Economics?
● Economics is the study of how individuals, firms, and governments make decisions to
allocate limited resources to satisfy unlimited wants and needs.
Two Main Branches:
● Microeconomics: Focuses on individual decision-makers like households and firms.
● Macroeconomics: Focuses on the economy as a whole—topics like inflation,
unemployment, and economic growth.
2. Scarcity and Choice
● Scarcity means resources are limited while human wants are unlimited.
● This limitation forces individuals and societies to make choices about how to allocate
resources.
Example: Choosing between studying for an exam or watching a movie—time is a limited
resource.
3. Opportunity Cost
● Opportunity cost is the value of the next best alternative that you give up when you
make a choice.
Example: If you spend $10 on fast food, the opportunity cost could be buying a book or saving
the money.
1. What is Economics?
● Economics is the study of how individuals, firms, and governments make decisions to
allocate limited resources to satisfy unlimited wants and needs.
Two Main Branches:
● Microeconomics: Focuses on individual decision-makers like households and firms.
● Macroeconomics: Focuses on the economy as a whole—topics like inflation,
unemployment, and economic growth.
2. Scarcity and Choice
● Scarcity means resources are limited while human wants are unlimited.
● This limitation forces individuals and societies to make choices about how to allocate
resources.
Example: Choosing between studying for an exam or watching a movie—time is a limited
resource.
3. Opportunity Cost
● Opportunity cost is the value of the next best alternative that you give up when you
make a choice.
Example: If you spend $10 on fast food, the opportunity cost could be buying a book or saving
the money.
