ECO 1101 Microeconomics Chapter 1 Lecture 1.

Economics Defined
Economics studies how people and institutions within a society make choices, and how the choices determine how the resources of society are used. To keep the definition of economics clear to students during discussion of the chapter, project the definition, leaving ample space for inserting comments. You can then analyze each important word in the definition, adding to the definition as you proceed. In this way students will have a birds-eye view at all times.

systematized according to general laws or principles. As a social science, economics studies the behavior and interactions of human beings, individually and in groups, and is thus related to political science, sociology, psychology, and ethics. However, some of its laws are based on physical phenomena, and it also is closely related to mathematics.

G. Economic Theory and Policy. It is

important to distinguish between economic theory and economic policy. Economic theory develops the rules and principles of economics and provides a guide for action. Economic policy refers to actions actually taken. In the course of implementation, economic principles may at times be modified by political, social, or military policy. Cite examples of this concept for students consideration. Explain the difference between positive economics and normative economics.

A. Economics and Production. Define

production as the creation or addition of utility. Define utility as the economists term for the ability of a good or service to satisfy a want. The sum of all the goods and services produced by an economy over a given time period is known as total product.

H. Economic Terms and Concepts. Economics has its own jargon and terminology.
Understanding economics terminology is essential. In addition to defining marginal analysis, assumptions, rational behavior, and equilibrium; be sure that students understand that the concepts are fundamental building blocks for the study of economics. Also review the fallacy of composition, the paradox of thrift, and moral hazard.

B. Economics and Distribution. Use Figure

1-1 to explain the four productive resources and to indicate the form of compensation each receives for its contribution to production.

C. Economics and Consumption. Explain

why consumption is the ultimate end of all economic activity.

D. Goods and Services. Explain that economic

goods and services must be useful, scarce, and transferable. Show how services have all the characteristics of material goods except that they are intangible. Explain the differences among economic goods, free goods, and public goods, as well as between consumer goods and capital goods.

2. Microeconomics and Macroeconomics

In distinguishing between microeconomics and macroeconomics, bring out the fact that this book (course) deals with macroeconomics, microeconomics, and international economics.

3. Economics Is a Science of Choices

There are many alternatives to consider in making economic decisions. Many problems have no clear-cut, definitive answer. A prudential judgment must be made as to the best means to attain a desired objective.

E. Wealth and Income. Distinguish between

the stock concept of wealth and the flow concept of income.

F. Economics in Relation to Other Sciences. A science is an organized body of

knowledge coordinated, arranged, and