Chapter 1, Problem 1QS

To determine

Reason how economics become the science of choices.

Explanation of Solution

Economics is the study of scarcity and how individuals and the society deal with the fact that there are only limited resources available to unlimited human needs and wants. It is a broad subject that deals with how people make choices or the behavior of people since the problem of scarcity exists. 

Suppose purchasing of goods at a given price depends on the choice of each individual, economics focuses on the variables that influence their decision making, which include price of the good, price and availability of alternatives, and so on. If there is no choice, then economics becomes irrelevant.

In labor market, there is scarcity related to the working time and leisure time, so that workers decide how much time they have to work or spend for leisure. It depends on the opportunity cost of working and time spent for leisure. Workers always compare the cost and benefits of additional time spent for work. The employers compare the cost of additional workers and the revenue. Thus, relative scarcity determines each choice or decisions in the labor market.

Microeconomics refers to a focus on a several issues such as consumer behavior, producer behavior, market segments, wage determination, supply and demand of individuals, and so on. It deals with smaller units such as individuals, firms, households, and market. Macroeconomics refers to the study of a whole unit. It studies the whole market simultaneously. It is also interested in studying the national unemployment rate, foreign debt, and exchange rate.