The Study of Economics

May 20th, 2015
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A. T. Still University
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Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided.

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The Study of Economics Economics is the study ofhow individuals and societieschoose to use the scarceresources that nature andprevious generations haveprovided. 2002 Prentice Hall Business PublishingPrinciples of Economics, 6/eKarl Case, Ray FairWhy Study Economics? Probably the most important reasonfor studying economics is to learna way of thinking. Three fundamental concepts: Opportunity cost Marginalism, and Efficient markets 2002 Prentice Hall Business PublishingPrinciples of Economics, 6/eKarl Case, Ray FairOpportunity Cost Opportunity cost is the bestalternative that we forgo, or giveup, when we make a choice or adecision. Opportunity costs arise becausetime and resources are scarce.Nearly all decisions involve tradeoffs. 2002 Prentice Hall Business PublishingPrinciples of Economics, 6/eKarl Case, Ray FairMarginalism In weighing the costs and benefits of a decision,it is important to weigh only the costs andbenefits that arise from the decision. For example, when deciding whether to produceadditional output, a firm considers only theadditional (or marginal cost), not the sunk cost. Sunk costs are costs that cannot be avoided,regardless of what is done in the future, becausethey have already been incurred. 2002 Prentice Hall Business PublishingPrinciples of Economics, 6/eKarl Case, Ray FairEfficient Markets An efficient market is one in whichprofit opportunit

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