Microeconomics by McConnell, Brue & Flynn, 20th Edition
Summary of Class Lecture Notes MN
Chapter 1 – Limits, Alternatives, and Choices
1. This
... [Show More] chapter introduces many of the fundamental concepts in economics. These
include:
The definition of Economics;
The Economic Perspective;
The Scientific Method;
The Individual’s economizing problem using a budget line;
Society’s economizing problem using the Production Possibilities Model;
Economic growth; and
Common Pitfalls to Sound Economic Reasoning
2. Economics
Society’s wants exceed its productive capacity (economic resources).
It is not possible to produce all of society’s wants.
Choices must be made on how best to use society’s resources and what goods and
services to produce in a given period of time.
Optimal economic choices given the fact of scarcity of resources.
Every choice made in the use of resources impacts the economy
Economics is defined as “The social science concerned with how individuals,
institutions, and society make optimal choices under conditions of scarcity.”
“Wants” exceed “Haves” because productive resources are scarce or limited.
3. The Economic Perspective
The Economic perspective is : the particular lenses through which economists view
society. It is economists’ unique view on society.
The economic perspective has several closely interrelated features:
(i) Scarcity and Choice – Society’s resources are scarce; scarcity restricts choices
among alternative options; some options must be forgone at any given time;
therefore, every option chosen has its opportunity cost. Opportunity Cost is the
cost or value of the next best alternative forgone.
(ii) Purposeful Behavior – This refers to the economic assumption of rational selfinterest behavior in society in pursuit of the desired goals of maximization of
utility by individuals, maximization of profits by business firms and the
maximization of society’s well-being by government agencies.
“These is no such thing as a free lunch” because every resource has its cost,
alternative uses; and therefore, its opportunity cost. [Show Less]