Chapter 1: Economics: The Study of Choice
Start Up: Economics in the News – COVID-19
What causes the prices of some good to rise while the prices of some other goods fall? Price determination is one of the things that we will study in this book. We will also consider factors that lead an economy to fall into a recession—and the attempts to limit it.
While the investigation of these problems surely falls within the province of economics, economics encompasses a far broader range of issues. Ultimately, economics is the study of choice under scarcity. Because choices, and scarcity, affect every imaginable aspect of human experience, so does economics. Economists have investigated the nature of family life, the arts, education, crime, sports, job creation—the list is virtually endless because so much of our lives involves making choices.
How do individuals make choices: Would you like better grades? More time to relax? More time watching movies? Getting better grades probably requires more time studying, and perhaps less relaxation and entertainment. Not only must we make choices as individuals, we must make choices as a society. Do we want a cleaner environment? Faster economic growth? Both may be desirable, but efforts to clean up the environment may conflict with faster economic growth. Society must make choices. Managers must apply these choices to running a team, a department, or a company.
Economics is defined less by the subjects economists investigate than by the way in which economists investigate them. Economists have a way of looking at the world that differs from the way scholars in other disciplines look at the world. It is the economic way of thinking; this chapter introduces that way of thinking.
