Copyright © 1999-2008 Samuel L. Baker

Economics: Basic Concepts

Economics: Broad Definition

Economics: Narrower Definition

An economic system

Goods and services


Resource types



The relationship between the economics and the business usages of "capital"


Investment examples

Classical economists had three categories

Natural resources and capital -- the same?

Health can be regarded as capital

Health care -- a consumption good and an investment good

Health care is purchased to enhance health.
  1. Health enhances our enjoyment of life. Health care is a consumption good.
  2. Health enhances labor productivity. Health care is an investment good.
An investment is any action that increases capital, including human capital. Abilities (physical or mental) that human beings develop are human capital.

Health Care, Resources, and Production

This is our segue to discussing the central issue of economics: "The Economic Problem"

The Economic Problem

The Economic Problem in two words:

Allocation and Distribution

Economics helps us make allocation and distribution decisions better.

Table of terms for the goals of economics

In the U.S. health care system, scarcity is manifested as

High expenditure would not be bad, were it not for the suspicion that

Let's go over each of these points in turn:

- We're paying too much for what we get

- We're not getting the best mix of goods and services that we could for the resources we put in.

- Some people get more than they need, while others get less

Problems with how we solve the Economic Problem

Summary: Main concepts

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