What is Economics? The Merriam-Webster dictionary states that Economics is

"the analysis of the production, distribution, and consumption of goods and

services." But what does this mean? An Economics teacher once suggested that it

just means that Economics is the study of choice. Choice! Yes, we all know what

choices are. We make choices every day. For example, you decided to come to class

today. You choose class. You could have chosen sleep or going to the mall. But you

chose class.

Questions:

1. What is an easy to understand definition of Economics?

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2. What choice did you make today?

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So, why do we make choices? Well, we cannot have everything we want or need. I

may want a pizza, a movie ticket, and sports car. But I only have enough money to

buy the pizza and the movie ticket. In other words, people make choices because

wants and needs are always greater than the money we have and the goods

(products) and services that exist. And that's what economists study. They study

the choices that individuals, businesses, and even government leaders make.

Questions:

1. Why must people make choices?

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2. What do Economists study?

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People make choices because scarcity exists. Scarcity is an Economic concept. It is

the idea that human wants are unlimited but the world's resources are limited.

Again, people always want more than exists. So, because of scarcity, we cannot have

everything we want. Due to scarcity, we must choose.

Question:

1. What is scarcity?

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Yes, people choose but every choice has a cost because when a person chooses one

thing, he gives up another. For example, if I have ten dollars, I can buy a pizza or a

movie ticket. But I do not have enough money for pizza and a movie ticket. I must

choose. Today, I will choose the pizza. I did not get the movie ticket. So, the cost of

the pizza is the movie ticket or what I gave up when I got the pizza. Yes, it is sad

but true, but every time I get something, I give something else up. Every choice has

its cost.

Questions:

1. Why does every choice have its cost?

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2. Provide an example of a choice and its cost.

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This is why economists say that "there is no free lunch". Even if it seems "free",

there is still a cost. For example, if a town uses land to build a park, it cannot also

use the same land for a mall. Yes, every choice has its cost. We give something up

every time we get something.

Question:

1. Why is there no such thing as a free lunch?

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After we learn the truth that every choice has its cost, we can begin to make better

choices. Why? We will begin to look at the benefits or advantages of a decision but

also the costs of the decision. For example, we may want to sleep late and that may

give us more energy for the day. But if we sleep late, we will miss Economics class.

If we miss Economics class, it will be more difficult to pass the class. So, is it really a

good decision to sleep late? Yes, Economics can help us make better choices, choices

that benefit us more than they cost us.

Question:

1. How can understanding Economic ideas or principles help us make better

choices?

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Oh, and not all costs are the same. In other words, if I have ten dollars and I want

a pizza, a movie ticket, a book, and a pair of nice socks, I only have enough money

for one choice. So, I choose the pizza. I will not get the movie ticket, the book, or

the pair of nice socks. But really, of all the things I did not get, it was only the movie

ticket that I was upset about not getting. So, the movie ticket was the best choice I

did not get. Yes, Economists have a word for this best thing we didn't get. It's

called the Opportunity Cost. A formal definition of the opportunity cost is the most

desirable alternative given up for the decision. But you can think of it as the best

thing you didn't get.

Question:

1. When I chose the pizza, what did I not get?

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2. Of the things that I did not get, what did I want the most?

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3. What is the name of the Economic concept for the best thing I didn't get?

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