Help with Economics Homework Help
                     Economics

Economics, Scarcity, and Choice
• A good definition of economics
– Study of choice under conditions of scarcity
• Scarcity
– Situation in which the amount of something 
available is insufficient to satisfy the desire 
for it
3
Scarcity and Individual Choice
• There are an unlimited variety of scarcities, however 
they are all based on two basic limitations
– Scarce time
– Scarce spending power
• Limitations force each of us to make choices
• Economists study choices we make as individuals, 
and consequences of those choices
• Economists also study more subtle and indirect 
effects of individual choice on our society
4
Macroeconomics
• Macro
– Macro comes from Greek word, makros, meaning 
“large”
• Macroeconomics
– Study of the economy as a whole
• Focuses on big picture and ignores fine details
5
Positive Economics
• Study of how economy works
• Statements about how the economy works are 
positive statements, whether they are true or 
not
• Accuracy of positive statements can be tested 
by looking at the facts—and just the facts
6
Normative Economics
• Study of what should be
– Used to make value judgments, identify problems, 
and prescribe solutions
– Statements that suggest what we should do about 
economic facts, are normative statements
• Based on values
– Normative statements cannot be proved or 
disproved by the facts alone
7
Why Study Economics
• To understand the world better
– You’ll begin to understand the cause of many of 
the things that affect your life
• To gain self-confidence
– You’ll lose that feeling that mysterious, 
inexplicable forces are shaping your life for you 
8
The Methods of Economics
• Economics relies heavily on modeling
– Economic theories must have a well-constructed 
model
• While most models are physical constructs
– Economists use words, diagrams, and 
mathematical statements
• What is a model?
– Abstract representation of reality
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How to Study Economics
• Following alone in class and learning are two different 
things
– Economics must be studied actively, not passively
• What does active studying mean?
– Closing the book periodically and reproducing what you have 
learned
– Reading with a pencil in your hand and a blank sheet of paper in 
front of you
– Listing the steps in each logical argument
– Retracing the cause-and-effect steps in each model
– Drawing the graphs that represent the model
– Thinking about the basic principles of economics and how they 
relate to what you are learning
10
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