Economics

Key concepts discussed in this chapter: economics as a social science, positive economics, normative economics, economic model, economic theory, economic way of thinking, production possibilities frontier (PPF), opportunity cost, productive efficiency, allocative efficiency, Pareto efficiency, specialization, absolute advantage, comparative advantage

Economics as a science

The BIG Idea

Scarcity is the basic economic problem that requires people to make choices about how to use limited resources.

Why It Matters ?

Have you ever wanted to buy something or to participate in an activity, but you couldn’t because you didn’t have enough income or time? How do scarce resources like time and income affect you and everyone around you? In this chapter, read to learn about what economics is and how it is part of your daily life.

• ECONOMIST(1723–1790)
• Founder of Classical Economics
• Professor of Moral Philosophy, University of Glasgow,
• Author of The Theory of Moral Sentiments (1759),
• Author of An Inquiry Into the Nature and Causes of the Wealth of Nations (1776)

THE ISSUE

Although some insurance companies have started to base their rates on the number of years of driving experience rather than age, on average, it still costs young men more to insure their cars than young women or other age groups. A family that adds a teenage daughter to its insurance policy will pay about twice as much as before. If the same family adds a teenage son to the policy, the premiums may triple. Why do young men have to pay more for car insurance?

• English Philosopher and Radical Reformer
• Author of System of Logic (1843), Principles of Political Economy (1848), On Liberty (1859), Utilitarianism (1861), and The Subjection of Women (1869)
• Member of Parliament
• Godfather to the philosopher Bertrand Russell