2What is Economics?Study of how people meet their needs by making, distributing, and using goods and services.Peoples needs are met by using productive resourcesnatural resources, human resources, capital goods, and entrepreneurshipNOT spread evenly around the world
3Goods and Services Goods- objects that people make and use. Services- activities people do for others.
5The Problem of Scarcity Inability of our existing resources to meet our unlimited wantsThink of an example for the problem of scarcity.Everyone may want a new home but there are not enough materials, land, or labor available to build new homes for everyone.
6Opportunity CostWhen we choose to use our resources to satisfy a particular need, we give up the chance to use those same resources to satisfy other needs.“Trade-off” occurs whenever we give up one thing for anotherEvery economic decision using resources involves a trade-off, known as the opportunity cost of that decision.The opportunity cost of a decision is the next best choice that was given up—true cost of a decision.Give an example of opportunity cost.Money to buy stereo, you lose the opportunity to use that same money to buy a computerGovernment spends its resources to equip its army, fewer resources are available for other purposes
7Select one economic decision you made recently and its opportunity cost
8Every society has scarce resources to meet the unlimited wants of its members, every society must answer these questions.
93 Basic Economic Questions Societies answer these questions in different ways through the type of economic system instilled.Traditional-produce what ancestors produced, using same traditional methods, and then divide it as their ancestors didCommand-ruler tells everyone what to do and decides who gets what—communism or dictatorshipFree Market or Mixed Market-people are free to produce what they think they can sell to others, while others are free to buy whatever they can afford. Government does regulate some business.
10Give examples of the types of economic systems. TraditionalPeople grow own food and make their own goods, barter or exchange of goods without the use of money/currency.CommandCommunist countries of Cuba and North Korea are close to it.MarketUnited States, free to buy and sell what they wish, prices determined by supply and demand, sometimes called capitalism.
11Specialization and Trade What is specialization?Making of only some types of goods or servicesHow does it affect trade?It increases trade because regions rarely produce everything they need. They depend on one another for many goods and services.
12What causes specialization? Productive resources are NOT spread evenly around the worldDifferent parts of the world have differentClimatesSoilLandformsBodies of waterMineral resourcesTrainingEducationExperienceTherefore, different regions make certain types of goods based on the productive resources available.
13Advantages of Specialization Regions can take advantage of their own productive resourcesAs a result, a region can produce a good or service at the lowest opportunity cost.Producers become more skilledProducers learn how to make goods faster and more efficiently through the use of special tools and training.
14How Specialization Encourages Trade Because regions specialize, they rarely produce everything they need. Regions then rely on one another to supply many goods and services.Trade-merchants bring goods form one place to another, and then sell them in marketsImports:Goods from foreign countries brought into a country for sale.Exports:Goods and services sold from one country to other countries.
15How Supply and Demand Help Set Prices Demand– how much people want or need a product. Factors influencing demand:How well does the product satisfy people’s needs?Are there alternative products that satisfy the same needs?Is the product something people must have, or can they do without?Is it something everyone else has?Will having the product give the owner more power or status?Stronger the demand, the more expensive the productBuyer willing to pay more for quality, usefulness, and value.
16How Supply and Demand Help Set Prices Supply– how much of a product is available for saleSmall supply of a product is available, then it may be more expensivePeople will compete to buy it
17How Supply and Demand Help Set Prices The Interaction of Supply and DemandPRICESHIGH DEMAND/ SHORT SUPPLYInteraction of these forces affects the price that a buyer is willing to pay and what a merchant is willing to acceptPRICESLOW DEMAND/ LARGE SUPPLY
18Supply and Demand Create World Trade The need to exchange goods led to the development of trade and distinct trade patterns between peoples very early in human history.Reliance of one country on the resources, goods, and services of another country creates INTERDEPENDENCEInterdependence increases globalization—process through which countries are increasingly linked to each other through culture and trade