In modern times, one of the greatest promises of economics is growth. Over the last

Summary economics 7th edition 2024 paul krugman wells robin 9781319544706 1 / 4

Summary economics 7th edition 2024 paul krugman wells robin 9781319544706 2 / 4

Summary economics 7th edition 2024 paul krugman wells robin 9781319544706 3 / 4

Summary economics 7th edition 2024 paul krugman wells robin 9781319544706

Chapter 1: What Is Economics?

1.1 Introduction: An Engine for Growth and Discovery

Economics, at its heart, is about how societies use scarce resources to produce valuable goods and distribute them among people. This simple statement opens up a

vast domain of inquiry: what to produce; how to produce; and who gets what.

In modern times, one of the greatest promises of economics is growth. Over the last century, many countries have experienced transformative improvements in living standards, higher incomes, longer lifespans, and greater material comfort. Economic growth is not automatic. It is fueled by advances in technology, increases in capital, improvements in institutions, innovation, and effective resource allocation.In that sense, economics is also an engine for discovery: by studying incentives, trade, competition, costs, and behavior, economists aim to uncover the forces that push growth, identify constraints, and suggest policies that can help unlock performance. In the 21st century, new frontier digital technologies, climate change economics, global value chains, behavioral economics, enrich the field and put pressure on older models to adapt.Thus, Chapter 1 sets the stage: we ask What is economics? What guiding principles should we adopt? And how do we build useful models that help us think clearly about trade- offs and exchanges?

1.2 First Principles TEST!!To make progress, economics begins with a few core ideas—“first principles”—that help structure how we think about choices, scarcity, and incentives. Many textbooks group them under individual decision-making and interactions among people or markets. Below is a modern synthesis of these.

• Choice Is Necessary Because Resources Are Scarce

Resources—land, labor, capital, technology, time—are limited. Because we cannot have everything we want, we must make choices. Each choice means giving up alternatives, this leads to the concept of opportunity cost.

• The Real Cost of Something Is What You Give Up Getting It

Opportunity cost is central. If you spend time studying economics, you forgo time doing something else (work, sleeping, leisure). In policy, spending a dollar on one government program means not spending it on another. Thinking in terms of opportunity cost is more powerful than simply comparing monetary prices.

• “How Much” Decisions Require Thinking at the Margin

Many decisions are incremental: should you consume one more unit, produce one more unit, invest one more hour? Marginal analysis asks: does the additional benefit exceed the additional cost? Rational decision-makers continue an activity as long as marginal benefit ≥ marginal cost.

• / 4