01 Limits, Alternatives, and Choices McGraw-Hill/Irwin Copyright ? 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Introduction Economics defined Economic wants exceed productive capacity A social science concerned with making optimal choices under conditions of scarcity LO1 1-* The Economic Perspective Scarcity and Choice Purposeful Behavior Marginal Analysis Resources are scarce Rational self-interest Marginal benefit Choices must be made Individuals and utility Marginal cost Opportunity cost Firms and profit Marginal means extra There?s no free lunch Desired outcomes MB and MC LO1 1-* Theories, Principles, and Models The scientific method Economic principles Generalizations Other-things-equal assumption Graphical expression Observe