Choice: Basic set-up: Candidate sets, bundles of goods, comparison, national productive capacity
The most fundamental thing about how economists talk and think about choice is the notion that agents choose from a set of possibilities, with the aim of furthering some particular objective.
Sometimes the set of possibilities is clear. For example, in intro microeceonomics exercises, spending a specified quantity of money on various combinations of pizzas and records. (But obviously, in life one doesn't always budget first and then spend to a fixed budget.)
Note that example: economists think of people choosing bundles of goods/services or activities most often, not choosing one thing at a time. Because the resources one expends on a tomato cannot be used for bubble gum, the resources used to ice skate cannot simultaneously be used for sleeping, it's useful to allocate time or money or other resources across all desired categories at once. (Later on we'll talk about how to simplify that so we're not always trying to figure out simultaneously both what shoes to buy today and what to look for in a house in 2020.)
It's easy to think about a shopper with a fixed budget. But an entire nation has a set of yearly output combinations within its capacity (the technologies, natural resources, plant and equipment (capital), labor force, and institutional structures in the nation). You may have heard of this in terms of tradeoffs between guns and butter-- that is, military and non-military production.
Firms also make choices, but those are modeled in different ways.
Facebook posts incorporated:
Choice sets, consumer example
Chuce sets, production possibility frontier, national productive capacity
Sometimes the set of possibilities is clear. For example, in intro microeceonomics exercises, spending a specified quantity of money on various combinations of pizzas and records. (But obviously, in life one doesn't always budget first and then spend to a fixed budget.)
Note that example: economists think of people choosing bundles of goods/services or activities most often, not choosing one thing at a time. Because the resources one expends on a tomato cannot be used for bubble gum, the resources used to ice skate cannot simultaneously be used for sleeping, it's useful to allocate time or money or other resources across all desired categories at once. (Later on we'll talk about how to simplify that so we're not always trying to figure out simultaneously both what shoes to buy today and what to look for in a house in 2020.)
It's easy to think about a shopper with a fixed budget. But an entire nation has a set of yearly output combinations within its capacity (the technologies, natural resources, plant and equipment (capital), labor force, and institutional structures in the nation). You may have heard of this in terms of tradeoffs between guns and butter-- that is, military and non-military production.
Firms also make choices, but those are modeled in different ways.
Facebook posts incorporated:
Choice sets, consumer example
Chuce sets, production possibility frontier, national productive capacity