Chapter 1 Summary: What Is Economics?
The Basic Problem in Economics
This section begins by defining economics as "the study of how individuals, families, businesses, and societies use limited resources to fulfill their unlimited wants." The author, Roger Leroy Miller, then compares needs (something essential for survival) with wants (anything else). He discusses choices that need to be made by individuals, businesses, and governments due to a scarcity of income, time, and resources to acquire everything wanted. He wraps up this section with a discussion of the factors of production—land, labor, capital, entrepreneurship, and technology.
In this section, the author defines trade-offs as "exchanging one thing for the use of another." He explains that the cost of a trade-off is what is given up to get something else, also known as an "opportunity cost." This could be time, money, or another resource. He then defines and demonstrates how a production possibility curve is used to compare amounts of goods that can be produced utilizing fixed resources over a specified time period.
What Do Economists Do?
This section begins with a comparison of microeconomics ("the branch of economic theory that deals with behavior and decision making by small units such as individuals and firms") and macroeconomics ("the branch of economic theory dealing with the economy as a whole and decision making by large units such as governments"). The author then defines economy and discusses economic models. He explains what they show and how they are created, tested, and applied to real life. The author concludes with a discussion on schools of economic thought, explaining that although economists deal with facts, economists will often have differing theories based on their individual and unique perspectives.
Chapter 2 Summary: Economic Systems and the American Economy
This section focuses on economic systems and the three basic questions that need to be addressed in every economic system. The first involves determining what should be produced using limited resources. The second involves how products should be produced. The third involves for whom the products should be produced. The second half of this section looks at the four different types of economic systems: the traditional system, command system, market system, and mixed system.
Characteristics of the American Economy
In this section, the American economy is used to model a pure market economic system. It begins by defining capitalism and discussing government's limited role in the decision-making process of businesses. Next it defines the free enterprise system and explains that under this system individuals and businesses are free to make a profit or lose money. This is followed by a discussion of freedom of choice for consumers. After this, how profit incentive affects the economy is explained. A discussion on the ability of people and businesses to own private property follows. This section ends with a discussion of competition and how it helps drive the economy.
The Goals of the Nation
This section analyzes goals of a free enterprise system. The goals include economic freedom, economic efficiency, economic equity, economic security, economic growth, and trade-offs among goals. The section continues with a discussion about the rights and responsibilities of individuals. Some of the rights include an individual's ability to choose a career and how to spend his or her money. Some of the responsibilities include being able to support oneself and one's family, to use education to become a productive member of society, and to participate in government elections.
Chapter 3 Summary: Your Role As aConsumer
Consumption, Income, and Decision Making
This section begins by defining a consumer. It then compares disposable income, take-home pay, and discretionary income (i.e., money that is available for saving or wants after needs are satisfied). It concludes with a discussion of economic decision making, pointing out that consumers must make decisions based on scarce resources (time and money), opportunity costs...
(The entire section is 6,261 words.)