ECONOMICS AS A STUDY OF THE ALLOCATION OF SCARCE RESOURCES

From a technical perspective, economics is the study of how various alternatives or choices are evaluated to best achieve a given objective. The domain of economics is the study of processes by which scarce resources are allocated to satisfy unlimited wants. Ideally, the resources are allocated to their highest valued uses. Supply, demand, preferences, costs, benefits, production relationships and exchange are tools that are used to describe the market processes by which individuals allocate scarce resources to satisfy as many wants as possible. This increasingly narrow focus is the domain of modern, “neoclassical,” microeconomic analysis. This introductory chapter is intended to introduce some of the fundamental issues in the study of economics.