Economics Text Book Chapter Summaries

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The following chapter summaries are mostly based on the McConnell & Brue text “Economics- 16th Ed.”
Details available at note .. arrow means “leads to,” “results in,” “causes”

Chapter 1 – The Nature and Method of Economics

Economics is the study of scarcity and choice

Key concept- opportunity cost: for a person to get more of one thing... he/she must forego getting something else

e.g. to get food must pay (give up) money
In economics rational behavior is assumed, e.g. people want more goods for less money
Assumption: we all want to increase utility = happiness, satisfaction
Rational self-interest not same as selfishness, e.g. one reason
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avoid inflation economic freedom and efficiency through minimization of regulations taxation and government spending equitable income and wealth redistribution reduction of poverty economic security, e.g. social security payments for retirees expansion of free trade with other countries

Economic goals often involve tradeoffs e.g.: redistribution of income/wealth transfers to the poor • increased taxation of the rich • reduced opportunities for the rich to invest including starting new businesses, and...

reduced incentives for the poor to retrain, relocate, work hard • slowed economic growth, slowed job growth

The two main categories of economics study: macroeconomics and microeconomics
Macroeconomics - examines the economy as a whole and its main sectors: government sector, household sector, business sector
An “aggregate” is a collection of specific economic units treated as one unit, e.g. the millions of consumers lumped together and called “consumers”
Macroeconomics seeks to obtain an overview or outline of the economy, i.e. examines the beach, not the grains of sand

Microeconomics - examines details of specific economic units... such as one household (typically a nuclear family), company, or unit of government...

i.e. examines the sand
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