Changes

:"a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services"

:"a social science concerned chiefly with description and analysis of the production, distribution, and consumption of goods and services"

That definition has several terms that cry out for definitions of their own, such as "social science" and "goods and services,"  You might acquire a habit of having a dictionary handy to look up words when you need to, and even when you think you know the meaning in order to see how the dictionary defines it.

That definition has several terms that cry out for definitions of their own, such as "social science" and "goods and services,"  You might acquire a habit of having a dictionary handy to look up words when you need to.

Perhaps we can improve on that definition of economics.  But let's first try to define what "goods and services" are, because they are found in the definition of "economics".  At first glance, "goods and services" are the things and activities that someone is willing to purchase.  Maybe you are not willing to pay for them, but someone is.  Essential goods include food, clothes, cars, and books.  We all pay in some way for those.  The services that we need include help by doctors, dentists, teachers and barbers.  A "good" is a tangible "thing", something you can touch; a "service" is an activity, like a taxicab driver transporting someone.  Candy is a "good"; entertainment is a "service".

Perhaps we can improve on that definition of economics.  But let's first try to define what "goods and services" are, because they are found in the definition of "economics".  At first glance, "goods and services" are the things and activities that someone is willing to purchase.  Maybe you are not willing to pay for them, but someone is.  Essential goods include food, clothes, cars, and books.  We all pay in some way for those.  The services that we need include help by doctors, dentists, teachers and barbers.  A "good" is a tangible "thing", something you can touch; a "service" is an activity, like a taxicab driver transporting someone.  Candy is a "good"; entertainment is a "service".

The meaning of "goods and services" extends beyond our basic needs.  We do not '''''need''''' to go to a restaurant or a Yankees baseball game, or see a movie.  We do not '''''need''''' to buy ice cream in order to survive.  Sometimes people buy things like fancy clothes or cars in order to impress others.  These are things that people '''''want''''' beyond what they '''''need'''''.  And people work harder to obtain what they want for themselves, their children, and even to give to charity.

The meaning of "goods and services" extends beyond our basic needs.  We do not '''''need''''' to go to a restaurant or a Yankees baseball game, or see a movie.  We do not '''''need''''' to buy ice cream in order to survive.  Sometimes people buy things like fancy clothes or cars in order to impress others.  These are things that people '''''want''''' beyond what they '''''need'''''.  And people work harder to obtain what they want for themselves, their children, and even to give to charity.

So the meaning of "goods and services" goes far beyond what people need, and includes anything '''''they want and are willing to pay for'''''.  Note that not everything people want or need is something they are willing to pay for.  We all want air in order to breathe, but we are not willing to pay for air.  "Air" is not a "good or service."  We all want friendship too, but that's not something that can be purchased.  We all want the Yankees to win the World Series (well, not all of us do!), but we cannot directly buy that either.  At most we can buy tickets in exchange for the Yankees' playing a game and ''trying'' to win the World Series.  That "service" by the Yankees is a form of entertainment, like a music rock concert or a movie.

So the meaning of "goods and services" goes far beyond what people need, and includes anything '''''they want and are willing to pay for'''''.  Note that not everything people want or need is something they are willing to pay for.  We all want air in order to breathe, but we are not willing to pay for air.  "Air" is not a "good or service."  We all want friendship too, but that's not something that can be purchased.  We all want the Yankees to win the World Series (well, not all of us do!), but we cannot directly buy that either.  At most we can buy tickets in exchange for watching the Yankees' play a game at their stadium.  That "service" by the Yankees is a form of entertainment, like a music rock concert or a movie.

Now we are ready to define economics.  We do not have to use the vague term "social science" as Merriam Webster's dictionary did.  Our definition can simply be this:

Now we are ready to define economics.  We do not have to use the vague term "social science" as Merriam Webster's dictionary did.  Our definition can simply be this:

Money solves this inefficiency.  You accumulate dollars by doing work for someone who wants or needs it, and then use those dollars to buy the goods and services that you desire.  The person or company who receives your dollars can then spend it in yet another way.

Money solves this inefficiency.  You accumulate dollars by doing work for someone who wants or needs it, and then use those dollars to buy the goods and services that you desire.  The person or company who receives your dollars can then spend it in yet another way.

Money is, in many ways, a form of communication.  Donating money to a political candidate or a charity makes a statement.  Buying expensive clothes, a luxury car, or a showy house is like a form of speech too.  We often judge the value of something by looking at its price.  We expect a car that costs $30,000 to have higher quality than a car that costs only $15,000.  We don’t even have to drive each car to know that.  Sometimes the price can be misleading, of course.  But often price is a good indicator of the underlying value of the good or service.

Money is sometimes a form of communication.  Donating money to a political candidate or a charity makes a statement.  Buying expensive clothes, a luxury car, or a showy house is like a form of speech too.  One of the wealthiest men in history, [[Andrew Carnegie]], wrote a book called the “Gospel of Wealth,” and then gave it all away before he died.  Carnegie Hall, the first 39 branches of the [[New York Public Library]], and Carnegie-Mellon University were just a few of his gifts.

When asked how much more money people want, many say they would be happy with 20% more money than they have.  Remarkably, this answer is the same from the poorest to the wealthiest persons.  

 

When asked how much more money people want, many say they would be happy with 20% more money than they have.  Remarkably, this answer is the same from the poorest to the wealthiest persons. In absolute terms, the more money someone has, the more money he wants.  But some wealthy people give their money away to charity.  [[Andrew Carnegie]] acquired and hoarded one of the greatest amounts of wealth in the history of the world, wrote the “Gospel of Wealth,” and then gave it all away before he died.  Carnegie Hall, the first 39 branches of the [[New York Public Library]], and Carnegie-Mellon University were just a few of his gifts.

Freedom depends on the free exchange of money.  Communism and other totalitarian systems rely on government control over how money is earned, saved and spent.  Loss of this freedom inevitably results in the loss of the freedoms of religion and speech too.  If we ever lose our rights to pick a job or career, then it would not be surprising if we lost our rights of worship also.

Freedom depends on the free exchange of money.  Communism and other totalitarian systems rely on government control over how money is earned, saved and spent.  Loss of this freedom inevitably results in the loss of the freedoms of religion and speech too.  If we ever lose our rights to pick a job or career, then it would not be surprising if we lost our rights of worship also.

*"carpe diem" means "seize the day" and not waste a good opportunity.  The present time is worth more than time in the distant future, when it is unknown what will be possible or even if the world will still exist as it does today.  Show appreciation now, for example.  The same principle of "carpe diem" can be seen in the Parable of the Talents (Mt 25:14-30) and the Parable of the Fig Tree (Luke 13:6-9) (the master gives the fig tree one more year to bear fruit, or else he'll chop it down)

*"carpe diem" means "seize the day" and not waste a good opportunity.  The present time is worth more than time in the distant future, when it is unknown what will be possible or even if the world will still exist as it does today.  Show appreciation now, for example.  The same principle of "carpe diem" can be seen in the Parable of the Talents (Mt 25:14-30) and the Parable of the Fig Tree (Luke 13:6-9) (the master gives the fig tree one more year to bear fruit, or else he'll chop it down)

Economics is special in how it focuses entirely on the present and future, and not on the past.  For example, the price a good sells for does not depend on how much it cost in the past, but how much someone will pay for it now or in the future.  This is a difficult for students to adjust to, as other school subjects like history are primarily about the past rather than the future.

Economics is special in how it focuses entirely on the present and future, and not on the past.  For example, the price a good sells for does not depend on how much it cost in the past, but how much someone will pay for it now or in the future.  This can be difficult for students to adjust to, as other school subjects like history are primarily about the past rather than the future.

For example, economics provides insights about the true nature of "time".  In economics the value of the future is compared to the value of the present.  There is no value to the past.  When Christian values are superimposed on economics, the Christian faith in eternity makes the future far more valuable than the present; time spent worrying about the past is wasted time.

For example, economics provides insights about the true nature of "time".  In economics the value of the future is compared to the value of the present.  There is no value to the past.  When Christian values are superimposed on economics, the Christian faith in eternity makes the future far more valuable than the present; time spent worrying about the past is wasted time.

Economics also takes account of probability and risk, as in the famous aphorism "a bird in the hand is worth two in the bush."  The two birds in the bush may fly away before you can put your hands on them.  Again, these insights go far beyond the concept of "money" and extend to many other aspects of life.

Economics also takes account of probability and risk, as in the famous aphorism "a bird in the hand is worth two in the bush."  The two birds in the bush may fly away before you can put your hands on them.  These insights go far beyond the concept of "money", and extend to many other aspects of life.

Economics is a relatively young subject or field, less than a few centuries old.  There is still many advances to be made in economics, and much more value to be obtained from it.  Perhaps some of the students in this class -- or your teacher -- will discover new economic truths during this course.  There are surprises in economics that are different from what we first expect.

Economics is a relatively young subject or field, less than a few centuries old.  There are still many advances to be made in economics, and much more value to be obtained from it.  Perhaps some of the students in this class -- or your teacher -- will discover new economic truths during this course!

Economics is the single most likely course (other than a Bible course) to change a student's life for the better, as many former students have described.  That is not simply because the student understands money and business better.  It is because the logic of economics empowers students to recognize that hardships can be turned into blessings, that opportunities exist all around for everyone, and that the future can be made far better than the present.  Many of Jesus's parables were stated in economic terms, such as the vineyard owner who paid all of his workers the same good wage no matter how long they worked (Mt 20:1-16).  Economics, especially when combined with Christianity, is a logical subject that yields unlimited optimism and opportunity.  Learn economics with an open mind and you will be forever glad you did.

Economics is the single most likely course (other than a Bible course) to change a student's life for the better, as many former students have described.  That is not simply because the student understands money and business better.  It is because the logic of economics empowers students to recognize that hardships can be turned into blessings, that opportunities exist all around for everyone, and that the future can be made far better than the present.  Economics, especially when combined with Christianity, is a logical subject that yields unlimited optimism and opportunity.  Learn economics with an open mind and you will be forever glad you did.

==More Definitions==

==More Definitions==

“Microeconomics” uses the Greek root "micro-", which means “small”.  Microeconomics is the study of individual decisions about goods and services.  It includes issues like how much a barber should charge for a haircut, or how much a grocery store should charge to sell a loaf of bread.  Microeconomics includes the study of your decisions in buying a good or service.  Our course here focuses on microeconomics more than macroeconomics.

“Microeconomics” uses the Greek root "micro-", which means “small”.  Microeconomics is the study of individual decisions about goods and services.  It includes issues like how much a barber should charge for a haircut, or how much a grocery store should charge to sell a loaf of bread.  Microeconomics includes the study of your decisions in buying a good or service.  Our course here focuses on microeconomics more than macroeconomics.

“Net benefits” are total benefits minus total costs.

“Net benefits” are total benefits minus total costs.  For example, the net benefit of working at McDonald's is your salary minus your taxes and expenses in getting there and back each day.

“Opportunity cost” is the value lost in order to do something.  Doing a job that pays only $5 per hour when you could have taken a different job at $12 per hour has an opportunity cost for you of $12-$5 = $7 per hour.  Wasting three hours stuck in traffic has an opportunity cost of the money you could have been earning for those three hours, such as the minimum hourly wage times three hours.

“Opportunity cost” is the value lost in NOT doing something more valuable.  Working at a job that pays only $5 per hour when you could have taken a different job at $12 per hour has an opportunity cost to you of $12-$5 = $7 per hour.  Wasting three hours stuck in traffic has an opportunity cost of the money you could have been earning for those three hours, such as the minimum hourly wage times three hours.

“Marginal analysis” consists of looking at the costs and benefits of an '''''incremental''''' change, rather than the overall costs and benefits.  For example, if you are already standing outside a grocery store, then the marginal cost of stopping in to buy a carton of milk is only a few minutes of your time plus the cost of the milk.  But if you are sitting at home, then the marginal cost of buying a carton of milk is much greater: you must get into your car and drive all the way to a grocery store, which takes much longer and consumes expensive gas, in addition to the cost of the milk.

“Marginal analysis” consists of looking at the costs and benefits of an '''''incremental''''' change, rather than the overall costs and benefits.  For example, if you are already standing outside a grocery store, then the marginal cost of stopping in to buy a carton of milk is only a few minutes of your time plus the cost of the milk.  But if you are sitting at home, then the marginal cost of buying a carton of milk is much greater: you must get into your car and drive all the way to a grocery store, which takes much longer and consumes expensive gas, in addition to the cost of the milk.

“Positive” statements in economics are '''''testable''''' claims of fact, without making any moral judgments.  For example, the statement that “most public school students watch at least three hours of television a day” is a positive claim.  It can be tested by doing a survey.  The people are spending their time poorly, but it is a fact that they act that way.  The remark that “fish live in trees” is also a positive statement.  The statement is false, but it is still a positive (testable) statement.  (Thanks to Tim S. for making this insightful point on conservapedia.com).

“Positive” statements in economics are '''''testable''''' claims of fact, without making any moral judgments.  For example, the statement that “most public school students watch at least three hours of television a day” is a positive claim.  It can be tested by doing a survey.  The people are spending their time poorly, but it is a fact that they act that way.  The remark that “fish live in trees” is also a positive statement.  The statement is false, but it is still a positive (testable) statement.  (Thanks to former Economics student Tim S. for making this insightful point on conservapedia.com).

 

In contrast, “normative” statements are judgments about whether something is good or bad.  People should not watch as much television or smoke cigarettes.  These are normative statements.  People should pray and read the Bible more often.  That is also a normative statement.

Sometimes we use the word “net”, as in “net benefits.” What that means is the total benefit minus the total cost.  For example, the net benefit of working at McDonald's is your salary minus your taxes and expenses in getting there and back each day.

In contrast, “normative” statements are judgments about whether something is good or bad.  People should not watch as much television or smoke cigarettes.  That is a normative statement.  People should pray and read the Bible more often.  That is also a normative statement.

We will also use the word “rational”, as in “rational choice.”  That means the choice or decision that maximizes the net benefit.  A rational action, in economic terms, would be to accept the job with the highest net benefit (salary minus taxes and expenses).  You may not actually want that job for other reasons, such as working for a company that hurts people (e.g., a casino in Atlantic City).  But those reasons would have to be translated into economic terms to be included as part of your economically rational decision.

We will use the word “rational”, as in “rational choice.”  That means the choice or decision that maximizes the net benefit.  A rational action, in economic terms, would be to accept the job with the highest net benefit (salary minus taxes and expenses).  You may not actually want that job for other reasons, such as working for a company that hurts people (e.g., a casino in Atlantic City).   

Finally, there is the concept of “redistribution”.  That is the concept that government should try to even out the wealth in society, taking money from the rich and giving it to the poor.  The process inevitably causes a loss in total societal wealth.  Redistribution is like a leaky bucket taking water from one pool and putting it into another, with water leaking out during the transfer.  The leak in the bucket corresponds to the direct and indirect costs of the transfer, including salaries for people to do the transfer and disincentives to those affected by it (people will not work as hard if they know their property is going to be taken away).

Finally, there is the concept of “redistribution”.  That is the concept that government should try to even out the wealth in society, taking money from the rich and giving it to the poor.  Redistribution inevitably causes a loss in total societal wealth.  Redistribution is like a leaky bucket taking water from one pool and putting it into another, with water leaking out during the transfer.  The leak in the bucket corresponds to the direct and indirect costs of the transfer, including salaries for people to do the transfer and disincentives to those affected by it (people will not work as hard if they know their property is going to be taken away).

The above concepts will become clearer for you as this course progresses.

The above concepts will become clearer for you as this course progresses.