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# Defining Economics 1. Define economics. 2. Explain the concepts of scarcity and opportunity cost and how they relate to the definition of economics. 3. Understand the three fundamental economic questions: * What should be produced? * How should goods and services be produced? * For w...

# Defining Economics 1. Define economics. 2. Explain the concepts of scarcity and opportunity cost and how they relate to the definition of economics. 3. Understand the three fundamental economic questions: * What should be produced? * How should goods and services be produced? * For whom should goods and services be produced? Economics is a social science that examines how people choose among the alternatives available to them. It is social because it involves people and their behavior. It is a science because it uses, as much as possible, a scientific approach in its investigation of choices. ## Scarcity, Choice, and Cost All choices mean that one alternative is selected over another. Selecting among alternatives involves three ideas central to economics: scarcity, choice, and opportunity cost. ## Scarcity Our resources are limited. At any one time, we have only so much land, so many factories, so much oil, so many people. But our wants, our desires for the things that we can produce with those resources, are unlimited. We would always like more and better housing, more and better education—more and better of practically everything. If our resources were also unlimited, we could say yes to each of our wants—and there would be no economics. Because our resources are limited, we cannot say yes to everything. To say yes to one thing requires that we say no to another. Whether we like it or not, we must make choices. Our unlimited wants are continually colliding with the limits of our resources, forcing us to pick some activities and to reject others. Scarcity is the condition of having to choose among alternatives. A scarce good is one for which the choice of one alternative use of the good requires that another be given up. Consider a parcel of land. The parcel presents us with several alternative uses. We could build a house on it. We could put a gas station on it. We could create a small park on it. We could