Ecoooooooooo

The 5 E's of Economics I. What Is Economics? Just what is the study of economics? A common "textbook-like" definition might be: Economics is the study of how we choose to use limited resources to obtain the maximum satisfaction of unlimited human wants This definition has four parts that we need to discuss: 1. 2. 3. 4. the "study of" economics choice scarcity maximizing satisfaction

A definition of "economics" that I used when I first taught is:

(NOTE: I am Mark and soon after I moved to Illinois I bought a house in Wonder Lake in McHenry County. Wonder Lake is a nice lake, private, but we didn't own a boat.) My definition highlights an important component of economics: SCARCITY. The reason why I didn't have a boat or the reason why you don't have everything that you want is because of SCARCITY. The term "scarcity" has a slightly different definition in an economics class than it does in the "real" world. NOTE: Many words have different meanings in an economics class than the definition that you may already know. For example, let's take the word DEMAND. If I ask you "What happens to the demand for boats when the price of boats goes up?" If the price of boats goes up, then demand for boats goes . . . . . .

NO! THE DEMAND DOES NOT GO DOWN. The quantity demanded goes down, but not demands itself. BECAUSE ECONOMISTS HAVE A DIFFERENT DEFINITION FOR DEMAND. We'll talk more about that later. Another example is the word INVESTMENT. In an economics class the term "investment" does NOT mean the stock market, money markets. Or mutual funds. We will have to call such things "financial investments" because the term "investment" has a different meaning in economics. So back to the term SCARCITY. Scarcity does not mean that only a little of something is available. Goods and services are scarce. These are the things that we want. Goods are tangible things that satisfy our wants (like boats, computers, cars, etc.), services are intangible things that satisfy our wants...