Microeconomics
Chapter 1

What is economics?
Economic questions exist because everyone wants more than it can possibly get.
We can't satisfy all our wants, this is called scarcity. General shortage of everything is scarcity. Because of scarcity we must make choices. These choices depend on the incentives we are faced with. Incentives are rewards that we would reap or a penalty we would face if we made a certain choice.
Definition of economics- the social science that studies the choices that individuals, businesses, governments, and societies make as they cope with scarcity and incentives that influence and reconcile those choices.
There are 2 branches of economics
Microeconomics- the study of choices made by the individuals and businesses and the influence of government in those choices
Macroeconomics- the study of the effects on the national and global economy of the choices that individuals, businesses and governments make

There are 2 questions that essentially summarize the scope of economics 1. How do choices end up determining what, how, and for whom goods and services are produced? 2. How can choices made in the pursuit of self-interest also promote the social interest
Question 1
Goods- the physical items which are produced for people
Services- the actions performed which are rendered for the people
Goods and services are the objects that people value and produce to satisfy needs.

What?- What should we produce?
What people produce changes over time. People used to be involved in farming and mining but now are not so much involved in that and more people are involved in services jobs.

How?
Goods and services are produced using the 4 “factors of production” Land- natural resources Labour- the time and effort that people put into producing goods and services. The quality of labour depends on the human capital, the knowledge