The three coordination problems any economy must solve are what to produce, how to produce it, and for whom to produce it. In solving these problems societies have found that there is a problem of scarcity.
Economic reasoning structures all questions in a cost/benefit frame: If the marginal benefits of doing something exceed the marginal costs, do it. If the marginal costs exceed the marginal benefits, don't do it.
Sunk costs are not relevant to the economic decision rule.
The opportunity cost of undertaking an activity is the benefit you might have gained from choosing the next-best alternative.
"There ain't no such thing as a free lunch" (TANSTAAFL) embodies the opportunity cost concept.
Economic forces, the forces of scarcity, are always working. Market forces, which ration by changing prices, are not always allowed to work.
Economic reality is controlled and directed by three types of forces: economic forces, political forces, and social forces.
Under certain conditions the market, through its price mechanism, will allocate scarce resources efficiently.
Economics can be divided into microeconomics and macroeconomics. Microeconomics is the study of individual choice and how that choice is influenced by economic forces. Macroeconomics is the study of the economy as a whole. It considers problems such as inflation, unemployment, business cycles, and growth.
Economics can be subdivided into positive economics, normative economics, and the art of economics. Positive economics is the study of what is, normative economics is the study of what should be, and the art of economics relates positive to normative economics.
