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ch01The Scope and Method of Economics(宏观经济学-Karl Case, Ray Fair)
The Scope andMethod of Economics The Study of Economics Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. Why Study Economics? An important reason for studying economics is to learn a way of thinking. Three fundamental concepts: Opportunity cost Marginalism, and Efficient markets Opportunity Cost Opportunity cost is the best alternative that we forgo, or give up, when we make a choice or a decision. Nearly all decisions involve trade-offs. Marginalism In weighing the costs and benefits of a decision, it is important to weigh only the costs and benefits that arise from the decision. Marginalism For example, when a firm decides whether to produce additional output, it considers only the additional (or marginal cost), not the sunk cost. Sunk costs are costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred. Efficient Markets An efficient market is one in which profit opportunities are eliminated almost instantaneously. There is no free lunch! Profit opportunities are rare because, at any one time, there are many people searching for them. More Reasons to Study Economics The study of economics is an essential part of the study of society. Economic decisions often have enormous consequences. During the Industrial Revolution, new manufacturing technologies and improved transportation gave rise to the modern factory system. More Reasons to Study Economics An understanding of economics is essential to an understanding of global affairs. Voting decisions also require a basic understanding of economics. The Scope of Economics Microeconomics is the branch of economics that examines the behavior of individual decision-making units—that is, business firms and households. The Scope of Economics Macroeconomics is the branch of economics that examines the behavior of economic aggregates— income, output, employment, and so on—on a n
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