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Principles of Microeconomics,: by Libby Rittenberg and Timothy Tregarthen

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Claudio Díaz ЯP³³

This document provides an overview of introductory microeconomics concepts. It defines economics as examining how people choose among alternatives given scarcity. Scarcity means desires are unlimited but resources are limited, so not all alternatives can be chosen. This creates three fundamental economic questions: what to produce, how to produce it, and for whom to produce it. Every choice has an opportunity cost, which is the value of the best alternative forgone. The document distinguishes microeconomics, which examines individual and firm decision-making, from macroeconomics, which looks at overall economy issues. It outlines the economic way of thinking as emphasizing opportunity costs and assuming individuals make choices to maximize their self-interest through small adjustments.

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Principles of Microeconomics,: by Libby Rittenberg and Timothy Tregarthen

Uploaded by

Claudio Díaz ЯP³³
172 views5 pages
This document provides an overview of introductory microeconomics concepts. It defines economics as examining how people choose among alternatives given scarcity. Scarcity means desires are unlimited but resources are limited, so not all alternatives can be chosen. This creates three fundamental economic questions: what to produce, how to produce it, and for whom to produce it. Every choice has an opportunity cost, which is the value of the best alternative forgone. The document distinguishes microeconomics, which examines individual and firm decision-making, from macroeconomics, which looks at overall economy issues. It outlines the economic way of thinking as emphasizing opportunity costs and assuming individuals make choices to maximize their self-interest through small adjustments.

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This document provides an overview of introductory microeconomics concepts. It defines economics as examining how people choose among alternatives given scarcity. Scarcity means desires are unlimited but resources are limited, so not all alternatives can be chosen. This creates three fundamental economic questions: what to produce, how to produce it, and for whom to produce it. Every choice has an opportunity cost, which is the value of the best alternative forgone. The document distinguishes microeconomics, which examines individual and firm decision-making, from macroeconomics, which looks at overall economy issues. It outlines the economic way of thinking as emphasizing opportunity costs and assuming individuals make choices to maximize their self-interest through small adjustments.

Copyright:

© All Rights Reserved
Download as PDF, TXT or read online from Scribd
Download as pdf or txt
172 views5 pages

Principles of Microeconomics,: by Libby Rittenberg and Timothy Tregarthen

Uploaded by

Claudio Díaz ЯP³³
This document provides an overview of introductory microeconomics concepts. It defines economics as examining how people choose among alternatives given scarcity. Scarcity means desires are unlimited but resources are limited, so not all alternatives can be chosen. This creates three fundamental economic questions: what to produce, how to produce it, and for whom to produce it. Every choice has an opportunity cost, which is the value of the best alternative forgone. The document distinguishes microeconomics, which examines individual and firm decision-making, from macroeconomics, which looks at overall economy issues. It outlines the economic way of thinking as emphasizing opportunity costs and assuming individuals make choices to maximize their self-interest through small adjustments.

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Principles of Microeconomics, v. 2.0.

1
by Libby Rittenberg and Timothy Tregarthen

1.1

L E A R N I NG O B JE C T I V E S

1. Define economics.

2. Explain the concepts of scarcity and opportunity cost and how they relate to the definition of

economics.

3. Understand the three fundamental economic questions: What should be produced? How should goods

and services be produced? For whom should goods and services be produced?

Economics

Scarcity, Choice, and Cost

Scarcity

Scarcity
scarce good

free good
Scarcity and the Fundamental Economic Questions

1. What should be produced? Using the economy’s scarce resources to produce one thing requires giving up

another. Producing better education, for example, may require cutting back on other services, such as health

care. A decision to preserve a wilderness area requires giving up other uses of the land. Every society must

decide what it will produce with its scarce resources.

2. How should goods and services be produced? There are all sorts of choices to be made in determining how

goods and services should be produced. Should a firm employ a few skilled or a lot of unskilled workers?

Should it produce in its own country or should it use foreign plants? Should manufacturing firms use new or

recycled raw materials to make their products?

3. For whom should goods and services be produced? If a good or service is produced, a decision must be

made about who will get it. A decision to have one person or group receive a good or service usually means it

will not be available to someone else. For example, representatives of the poorest nations on earth often

complain that energy consumption per person in the United States is many times greater than energy

consumption per person in the world’s scores of poorest countries. Critics argue that the world’s energy

should be more evenly allocated. Should it? That is a “for whom” question.

Opportunity Cost

Opportunity cost
KEY TAKEAWAYS

Economics is a social science that examines how people choose among the alternatives available to

them.

Scarcity implies that we must give up one alternative in selecting another. A good that is not scarce is

a free good.

The three fundamental economic questions are: What should be produced? How should goods and

services be produced? For whom should goods and services be produced?

Every choice has an opportunity cost and opportunity costs affect the choices people make. The

opportunity cost of any choice is the value of the best alternative that had to be forgone in making

that choice.

1.2
L E A R N I NG O B JE C T I V E S

1. Explain the distinguishing characteristics of the economic way of thinking.


2. Distinguish between microeconomics and macroeconomics.

The Economic Way of Thinking

1. Economists give special emphasis to the role of opportunity costs in their analysis of choices.

2. Economists assume that individuals make choices that seek to maximize the value of some objective, and that

they define their objectives in terms of their own self-interest.

3. Individuals maximize by deciding whether to do a little more or a little less of something. Economists argue

that individuals pay attention to the consequences of small changes in the levels of the activities they pursue.

Opportunity Costs Are Important

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