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We will consider factors that lead an economy to grow more or less rapidly, the determination of unemployment rates, and even the process through which governments make choices that can lead to the kind of dilemma the United States faced in 2011 as the national debt soared past the nation’s debt limit. Not only must we make choices as individuals, we must make choices as a society. Economists have a way of looking at the world that differs from the way scholars in other disciplines look at the world.
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. We could leave the land undeveloped in order to be able to make a decision later as to how it should be used. There are alternative uses of the land both in the sense of the type of use and also in the sense of who gets to use it. We pollute it when we drive our cars, heat our houses, or operate our factories.
The concept of opportunity cost must not be confused with the purchase price of an item.
Consider the cost of a college or university education.
A is one for which the choice of one use does not require that we give up another. The fact that gravity is holding you to the earth does not mean that your neighbor is forced to drift up into space!
One person’s use of gravity is not an alternative to another person’s use. Outer space, for example, was a free good when the only use we made of it was to gaze at it.
Economists have investigated the nature of family life, the arts, education, crime, sports, law—the list is virtually endless because so much of our lives involves making choices. 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. 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.