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Chapter 1 What is economics about Economics is concerned with addressing the economic problem of satisfying unlimited wants with our scarce resources Each economy must answer the following four basic questions What to produce How much to produce How to produce How to distribute production Whenever we choose to produce or consume one product we miss out on the alternative products that could have been produced using those resources This is known as the opportunity cost The production possibility frontier is a simple way of explaining opppotunity cost Assuming that only two goods are produced it shows that producing more of on e good requires us to produce less of the other Improvements in technology will cause the production possibility frontier to shift outwards Changes in the level of resources will change the position of the production possibility frontier moving it outwards when the level of available resources increases or inwards when the level decreases If an economy is producing at a point below the production possibility curve it is experiencing unemployment of resources Todays economic choices affect tomorrows economic outcomes If we choose to satisfy a want today we may not be able to satisfy want in the future In choosing between satisfying present or future wants Individuals must make choices between spending or saving Spending satisfies present wants while saving raises living standards Businesses must make choices about price how much to produce what resources to use and how to manage their employees Governments can influence the choices of individuals and businesses by affecting the cost of choices and other factors underlying their decision making processes Chapter 2 How economies operate Business firms combine the factors of production to produce goods and services Goods are tangible items for consumption whereas services are intangible acts that are of benefit to consumers The four main factors of production are Natural resources which
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