The "Economic Problem" and Factors of Production
This is where we will begin our actual study of economics. The "economic problem" referred to in the title is most easily summed up in just four short words: unlimited wants, limited resources.
From this basic starting point, the field of economics branches off into a million different directions. Economics can be used to explain the price of a gallon of gas, the cost of a haircut, and even the way in which professional sports teams approach the free agent market. The links to the right will take you to the Amazon pages of of some really great books that explore a more "non-traditional" side of economics, should you be so interested. You can also check out these books from your local library. |
Ordinarily, each chapter of the textbook will merit only a single day, but because this is the first tentative toe that we're dipping into the great big ocean that is Economics, we're going to spend a couple of extra days on the first chapter of the book. You'll also notice that the study guide (see link to the left) for Chapter 1 is quite long. Ordinarily, chapter study guides will be much shorter, but for Chapter 1, it's really important that we cover the material in detail, so that every makes sense later on down the road.
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Here's a brief video of a guy explaining the basic economic problem as outline above. He's a bit dry and kind of difficult to understand at points, but at the same time, he has a fancy English accent, so we can assume that whatever he says is absolute truth.
In all seriousness, it's important to understand that the fundamental economic problem (unlimited wants, limited resources) is at the heart of all that we will study about economics. If we had an unlimited amount of resources, it wouldn't even be necessary to worry about making more efficient decisions, and a lot of economists would be out of work. Luckily for us (and them), though, there are finite resources in the world and, as such, scarcity. |
The video to the right comes from the illustrious John Green, who is an amazingly talented author, in addition to being extremely YouTube-famous. Here, he examines the opportunity cost of attending college, by trying to answer the question, "Is college worth it?"
This video is particularly interesting, because after all, we're inclined to believe that college is worth the investment, no matter what. And while John Green does prove that in the first two minutes of the video, he also provides an alternative assessment of college. Economics tends to stick to quantitative assessments when it comes to cost-benefit analyses, but it does raise a good question: What are the limits of a cost-benefit analysis? |
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