Chapter 1 The Nature and Scope of Economics.
Economics is a social science that studies how people and institutions within a society make choices and how these choices determine the use of the society's scarce resources. Choices matter, because resources ore limited while wants are unlimited. Economics focuses on the production, distribution, and consumption of goods and services. Production is the creation or addition of utility. Utility is the ability of a good or service to satisfy a want. We produce whenever we make a product or render a service that is useful. The sum of all the goods and services produced by and economy over a given time period is the total product. Distribution generally refers to the allocation of the total product or income among the four productive resources. Before a person or business can engage in the production of goods or services, resources are necessary. Productive resources are all the natural, synthetic, and human inputs that are used in creating goods and services. Productive resources are conventionally divided into four broad categories: labor, land, capital, and enterprise. Labor refers to the time and effort expended by human beings involved in the production process. Labor includes the physical and mental efforts of individuals and groups in producing services. Land refers to much more than real estate. Land includes all the resources of the land, sea, and air. Capital refers to real tangible assets used to produce other goods and services. Enterprise is the act of organizing and assuming the risks of a business venture. An entrepreneur is the person who assumes this risk. The entrepreneur, or enterpriser, combines the other productive resources to produce the final product. In a market economy payment for use of the productive resources is made in the form of wages, rent, interest, and profits. This pattern is called the functional distribution of income.