1 Introduction
WHAT IS ECONOMICS? Economics is the study of how individuals and societies make choices subject to constraints. The need to make choices arises from scarcity. From the perspective of society as a whole, scarcity refers to the limitations placed on the production of goods and services because factors of production are finite. From the perspective of the individual, scarcity refers to the limitations on the consumption of goods and services because of limited of personal income and wealth. Definition: Economics is the study of how individuals and societies choose to utilize scarce resources to satisfy virtually unlimited wants. Definition: Scarcity describes the condition in which the availability of resources is insufficient to satisfy the wants and needs of individuals and society. The concepts of scarcity and choice are central to the discipline of economics. Because of scarcity, whenever the decision is made to follow one course of action, a simultaneous decision is made to forgo some other course of action. Thus, any action requires a sacrifice. There is another common admonition that also underscores the all pervasive concept of scarcity: if an offer seems too good to be true, then it probably is. Individuals and societies cannot have everything that is desired because most goods and services must be produced with scarce productive resources. Because productive resources are scarce, the amounts of goods and services produced from these ingredients must also be finite in supply. The concept of scarcity is summarized in the economic admonition that 1
