Three Basic Economic Questions What to produce? How to produce it? For whom to produce it?
Needs vs. Wants Need: something people need that is necessary for survival (ex: air, food, shelter) Want: an item we desire but that is not essential to survival
Goods vs. Services Goods: physical objects such as shoes and shirts Services: actions or activities that one person performs for another (ex: haircuts, tutoring, dental checkups, etc)
What is Economics?? Economics: the study of how people seek to satisfy their needs and wants by making choices
Why do we have to make these choices???? SCARCITY!!!!
Scarcity limited resources to meet unlimited wants All goods and services we produce are scarce!!!!!! ** scarcity always exists because our needs and wants are always greater than our resource supply. Goods and services are scarce because they are all made from resources that are scarce
Shortages NOT the same as scarcity! A shortage occurs when producers will not or cannot offer goods or services at the current prices….can be temporary or long term. (wars and droughts can create shortages)
GOAL OF ECONOMICS solving the problem of scarcity!!!
Things that make you go….hmmm 1. List 3 choices you made this weekend. 2. What influenced the choice? 3. What did you give up for that choice?
Trade-off Everytime we make a choice, we have to give up something. All the things that we give up are called TRADE-OFFS
Opportunity Cost Whenever you make a choice, there are many trade-offs. The MOST desirable alternative you give up is called the opportunity cost The opportunity cost is what you have to give up “that hurts most”