business. It is not mathematics. What is it then? It is both a subject area and a way of viewing the world.

1.1 What Is Economics, and Why Is It Important?

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Discuss the importance of studying economics

• Explain the relationship between production and division of labor

• Evaluate the significance of scarcity

Economics is the study of how humans make decisions in the face of scarcity. These can be individual

decisions, family decisions, business decisions or societal decisions. If you look around carefully, you will see

that scarcity is a fact of life. Scarcity means that human wants for goods, services and resources exceed what

is available. Resources, such as labor, tools, land, and raw materials are necessary to produce the goods and

services we want but they exist in limited supply. Of course, the ultimate scarce resource is time- everyone,
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