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Economics and Economic Activities

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1 Economics and Economic Activities
Are You Satisfied? Economics and Economic Activities Economics LAP 6

2 Objectives Discuss the nature of economics.
Explain economic activities.

3 Discuss the nature of economics.
Objective Discuss the nature of economics.

4 If you were to find a magic lamp with a genie inside, what would your wishes be?
No one can identify all of his/her wishes and dreams. It’s purely human nature. Some might even say that it’s economics!

5 What Is Economics? The study of how to meet unlimited, competing wants with limited resources. The process of deciding how to “get the most with the least”—obtaining the greatest satisfaction from the least amount of resources.

6 Economics in Action Countries ask, “How can we meet our citizens’ wants with the resources we have available?” Businesses ask, “What products should we produce and/or provide to consumers?” Consumers ask, “How should we spend our incomes to get the goods and services we want?”

7 What Are Wants? Wants are desires for things that may or may not be required. Wants can be divided into two categories: Economic wants: desires for things that can only be obtained by spending money Noneconomic wants: desires for things that can be obtained without money We will be discussing economic wants.

8 Characteristics of Wants
Unlimited Everyone always has wants. Changing Wants change as situations change. Competing We must choose which wants to satisfy at any one time because our resources are limited.

9 Economic Resources Resources Three categories of resources:
Items used to accomplish other activities such as producing or providing goods and services Natural resources Items found in nature that are used to produce goods and services Human resources People who are valued for the physical and mental work that they do to produce goods and services Capital goods All of the manufactured or constructed items that are used to produce goods and services

10 Our Resources Are Limited
Our natural resources are limited by: An increasing global population The difficulty or cost involved in obtaining them A lack of technology in some developing countries Natural resources that may be running out Weather conditions The environment

11 Our Resources Are Limited
Our human resources are limited because: Only some people are willing and able to work. Many parts of the world are experiencing worker shortages in certain professions because of: A lack of special training Qualified potential employees who do not live where the job opportunities exist

12 Our Resources Are Limited
Our capital goods are limited by: The amount of labor and natural resources available to produce them The money available to purchase them A lack of technology in some parts of the world

13 Economics: The Study of Scarcity
Economizing: Scarcity is caused by the gap between unlimited wants for goods and services and limited resources. Our goods and services are scarce because not everyone can have everything s/he wants. Scarce resources must be allocated to their best use. Deciding which goods and services to purchase or provide so that the most satisfaction can be obtained Trying to obtain the greatest satisfaction from limited resources

14 Making Good Choices Opportunity cost: Examples:
The benefit that is lost when you decide to use scarce resources for one purpose rather than for another If you study for an economics exam rather than going out with friends, your opportunity cost is the lost benefits of socializing with others. If a retailer closes on Sundays, its opportunity cost is the lost benefits received from being open for business on Sundays. If a government spends more money on defense than on education, its opportunity cost is the lost benefits from education.

15 Making Good Choices Before making a decision, you should examine the opportunity costs involved. Economic choices involve trade-offs. We must be willing to give up all or part of one thing in order to get something else. Our trade-offs should be based on the opportunity costs involved.

16 Basic Economic Questions
What will be produced? What and how many goods and services should the society produce? How should the society allocate its limited resources between production of capital goods and consumer goods?

17 Basic Economic Questions
How will the products be produced? What are the best, most efficient ways to use the society’s limited resources to produce its products?

18 Basic Economic Questions
How will the products be allocated? How will the goods and services be divided among the people? How will individuals, businesses, and governments share the products?

19 Economic Decision-Making
The heart of economics is decision-making. The objective of studying economics is to prepare for: Effective decision-making Responsible citizenship in society

20 Explain economic activities.
Objective Explain economic activities.

21 Getting What We Need Four economic activities make this movement possible. We rely on others to provide us with some of the goods and services that we desire. Goods, services, and resources must move from one person to another. Consumption Production Exchange Distribution

22 Economic Activities: Consumption
Consumption is the economic process or activity of using goods and services. The ultimate goal of all economic activity is consumption. Anyone who uses goods and services is a consumer. People consume goods and services to satisfy their wants and needs.

23 Economic Activities: Production
Producers transform resources into more valuable goods and services. Production is the economic process or activity of producing goods and services. For consumption to occur, goods and services must be produced. Individuals who make or provide goods and services are called producers. The relationship between consumption and production must be balanced.

24 Economic Activities: Exchange
Most resource owners require some form of payment—usually money—for the use of their resources. Producers, consumers, and resource owners exchange money payments. Payments for capital goods: Resource owners are people and organizations who provide human resources, natural resources, or capital goods for use in production. Payments for human resources: Interest Rent Producers make these money payments to get resources for production. Wages Salaries Profits

25 Economic Activities: Exchange
After acquiring enough resources, producers are able to produce goods and services. Consumers make money payments to obtain these goods and services. This money payment is the price of the good or service. Exchanges among producers, consumers, and resource owners result in a circular movement of resources, goods, services, and money payments.

26 Economic Activities: Distribution
Distribution is the economic process or activity by which income is divided among resource owners and producers. Money received by resource owners and producers is known as income. Resource owners use income to buy more goods and services. Producers use income to buy more resources.

27 Economic Activities: Distribution
Resource owners and producers often engage in a tug of war over how to divide the income they receive from consumers. The way in which they divide their income depends on their society’s economic system. If resource owners don’t think their incomes are large enough They might not share their resources with producers anymore Which would cause production to cease If producers don’t think their incomes are large enough They might not make any more goods and services Which would cause consumption to cease

28 Money Values Consumers pay more for things that bring them greater satisfaction. Goods and services that give little satisfaction are less expensive. The values attached to money payments depend on: 3.2GHz Productivity Productive resources usually earn more than less productive ones. Demand As people’s demand for resources, goods, and services increases, so do the money payments they are willing to make. Availability or supply Resources, goods, and services that are abundant are valued less than scarce ones.

29 Everyone participates in economic activities.
What does your school consume? What does the school produce? What resources does the school use? Where do these resources come from? How does the school take part in exchange and distribution activities?

30 The Howell family has owned Happy Acres Farm for 150 years.
Is that fair? The Howell family has owned Happy Acres Farm for 150 years. The state intends to build a highway across the farm. The Howell’s don’t want to sell Happy Acres. The state is exercising its power of eminent domain to seize the farm without the family’s consent. Should the state be allowed to seize the property? What do you think? The state will pay the family for the property. The state—not the Howells—gets to set the purchase price for the farm.

31 MBAResearch Acknowledgments Original Developers
Christopher C. Burke, April J. Miller, MBAResearch Version 1.0 Copyright © 2010 MBA Research and Curriculum Center®

32 Digital-based photography sources:
DIGITAL VISION LTD. Teenager Today Obj. B: #130271 Photos copyright Digital Vision Ltd., all rights reserved. 833 Fourth Ave. SW, Suite 800 Calgary, AB, Canada T2P 3T5

33 Copyright: All photographic digital images on this CD are owned by the aforementioned photographic resources or their licensors and are protected by the United States copyright laws, international treaty provisions, and applicable laws. No title to or intellectual property rights to the images on this CD are transferred to you. These sources retain all rights and are not to be used, digitally copied, transferred, or manipulated in any way. To do so is a violation of federal copyright laws.


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