Of Economics

The word economy comcs from the Crock word oikonomos, which means "one who manages a household." At first, this origin might seem peculiar. But in fact, households and economies have much in common.

A household faces many decision». It mujt decide which member» of the household do which tasks and what each member gets in return: Who cook» dinner? Who does the laundry? Who gels the extra dessert at dinner? Who gets to choose what TV show to watch? In short, the household must allocate its scarce resources among it» various member», taking into account each member's abilities, efforts, and desires

Like a household, a society faces many decisions. A society must find some way to decide what job» will be done and who will do them. It need» some people to grow food, other people to make clothing, and still others to design computer software. Once society has allocated people (as well as land, buildings, and machines) to various jobs, it must also allocate the output of goods and services they produce. It must decide who will eat caviar and who will eat potatoes. It must decide who will drive a Ferrari and who will take the bus.

The management of society's resources is important because resources are scarce. Scarcity means that society has limited resources and therefore cannot scarcity produce all the good.«, and service» people wish to have. Ju»t a» each member of the limned nature of a household cannot get everything he or she wants, each individual in a society society'» resourc« cannot attain the highest standard of living to which he or she might aspire

Economic* is tlx- study of how society manages its scarce resources. In most societies, resources are allocated not by an all-powerful dictator but through the combined actions of millions of household* and firms. Kconombts therefore study how people make decision»: how much they work, what they buy, how much they save, and how they invest their savings. Economists also study how people interact with one another. For instance, thev examine how the multitude of buyers and sellers, of a good together determine the price at which tlte good is sold ami the quantity that is sold. Finally, economists analyze forces and trends that affcct the economy as a whole, including the growth in average income, the fraction of the population that cannot fiivd work, and the rate at which price« are rising.

TTh; study of economics has many facet», but it is unified by several central ideas. Ln this chapter, we look at Ten Principtcs of Etonomks. Don't worry if you don't understand them all at firs! or if you aren't completely convinced. We will explore these ideas more fullv in later chapters. The ten principles are introduced here to give you an overview of what economics is all about. Consider this chapter a "preview of coming attractions "

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