Chapter 1
Economic Choices
I. Chapter Outline
Scarcity of resources relative to our needs and wants requires that we make choices about
the alternative uses of those resources. The economic choices that society makes are
made in the light of certain goals. Various tools of economic analysis assist us in making
those choices.
Introductory Article: We Are the World
Starvation in Africa illustrates the eternal conflict between human economic needs and
the resources available to satisfy those needs. The gap between our basic needs and other
wants and the world s limited resources results in the problem of scarcity.
Economic Analysis
This chapter examines the problem of scarcity by addressing the following three
questions:
1. Why Do We Have To Make Economic Choices?
Key Concepts: Scarcity， Trade-offs， Opportunity costs
Key Model: Production possibility frontier
Case Application: Dieting-- The National Pastime
2. What Are Society s Economic Goals?
Key Concepts: Efficiency， Price stability， Full employment， Growth，
Socioeconomic goals
Case Application: Replaced by R2D27
3. How Does the Study of Economics Help Us Make Choices?
Key Concepts: Economic Reasoning， Concepts， Models， Statistics， History，
and Institutions
Case Application: Does It Pay to Go to College?
Perspective: The Affluent Society
Biography-- John Kenneth Galbraith
II. Summary of Economic Analysis
1. The most basic problem economics is concerned with is scarcity.
2. Any good that commands a price is scarce and is considered an economic good.
3. The degree of scarcity of a good depends on how much is available relative to the
amount wanted.
4. Since resources are scarce， there is a trade-offbetween alternative uses.
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