INTRODUCTION TO ECONOMICS

The Scope and
Method of Economics
The study of economics should
begin with a sense of wonder. Pause
for a moment and consider a typical
day in your life. It might start
with a bagel made in a local bakery
with flour produced in Minnesota
from wheat grown in Kansas and
bacon from pigs raised in Ohio
packaged in plastic made in New
Jersey. You spill coffee from
Colombia on your shirt made in
Texas from textiles shipped from
South Carolina.
After class you drive with a
friend on an interstate highway
that is part of a system that took
20 years and billions of dollars to build. You stop for gasoline refined in Louisiana from Saudi
Arabian crude oil brought to the United States on a supertanker that took 3 years to build at a
shipyard in Maine.
Later you log onto the Web with a laptop computer assembled in Indonesia from parts
made in China and send an e-mail to your brother in Mexico City, and you call a buddy on a cell
phone made by a company in Finland. Your call is picked up by a microwave dish hidden in a
church steeple rented from the church by a cellular company that was just bought by a European
conglomerate.
You use or consume tens of thousands of things, both tangible and intangible, every day:
buildings, rock music, iPods, telephone services, staples, paper, toothpaste, tweezers, pizza, soap,
digital watches, fire protection, banks, electricity, eggs, insurance, football fields, computers,
buses, rugs, subways, health services, sidewalks, and so forth. Somebody made all these things.
Somebody organized men and women and materials to produce and distribute them. Thousands
of decisions went into their completion. Somehow they got to you.
In the United States, over 146 million people—almost half the total population—work at
hundreds of thousands of different jobs producing over $14 trillion worth of goods and services
every year. Some cannot find work; some choose not to work. Some are rich; others are poor.
The United States imports over $257 billion worth of automobiles and parts and about
$229 billion worth of petroleum and petroleum products each year; it exports around $62 billion
worth of agricultural products, including food. High-rise office buildings go up in central cities.
Condominiums and homes are built in the suburbs. In other places, homes are abandoned and
boarded up.
Some countries are wealthy. Others are impoverished. Some are growing. Some are not.
Some businesses are doing well. Others are going bankrupt.
At any moment in time, every society faces constraints imposed by nature and by previous
generations. Some societies are handsomely endowed by nature with fertile land, water, sunshine,
and natural resources. Others have deserts and few mineral resources. Some societies receive
much from previous generations—art, music, technical knowledge, beautiful buildings, and productive
factories. Others are left with overgrazed, eroded land, cities leveled by war, or polluted
natural environments. All societies face limits.
CHAPTER OUTLINE
Why Study
Economics? p. 2
To Learn a Way of
Thinking
To Understand Society
To Understand Global
Affairs
To Be an Informed Citizen
The Scope of
Economics p. 7
Microeconomics and
Macroeconomics
The Diverse Fields of
Economics
The Method of
Economics p. 10
Descriptive Economics and
Economic Theory
Theories and Models
Economic Policy
An Invitation p. 15
Appendix: How to
Read and Understand
Graphs p. 18