David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

Learning Outcomes
By the end of this chapter, you should understand:
0 that economics is the study of how society resolves the problem of scarcity
f) ways in which society decides what, how and for whom to produce
0 the concept of opportunity cost
G positive and normative economics
0 microeconomics and macroeconomics
Every group of people must solve three basic problems of daily living: what goods and services to produce,
how to produce them and for whom to produce them.
Goods are physical commodities, such as steel or strawberries. Services are activities such as massages or
live concerts, consumed or enjoyed only at the instant they are produced. In rare cases some of the questions
about what, how and for whom to produce have already been answered: until the arrival of Man Friday,
Robinson Crusoe can ignore the 'for whom' question. Normally, society must answer all three questions.
By emphasizing the role of society, our definition places economics within the social
sciences that study and explain human behaviour. Economics studies behaviour in
the production, exchange and use of goods and services. The key economic
problem for society is how to reconcile the conflict between people's virtually
limitless desires for goods and services, and the scarcity of resources (labour,
machinery and raw materials) with which these goods and services can be produced.
In answering what, how and for whom to produce, economics explains how scarce
resources are allocated among competing claims on their use.
Economics is the study of how
society decides what, how and
for whom to produce.
A resource is scarce if the
demand of that resource at
a zero price would exceed the
available supply.
Although economics is about human behaviour, we describe it as a science. This reflects the method of
analysis, not the subject matter, of economics. Economists develop theories of human behaviour and test
them against the facts. Chapter 2 discusses the tools that economists use and explains the sense in which
this approach is scientific. This does not mean that economics ignores people as individuals. Moreover,
good economics retains an element of art. Only by having a feel for how people actually behave can
economists focus their analysis on the right issues.
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