1. What is economics?

2. Economic choices
We are faced with choices because we do not have enough productive resources to satisfy all of our wants and needs.

3. Economics: the study of how we make decisions in a world where resources are limited.

4. Need or want? Wants Needs Required for survival
Things we would like to have

5. The fundamental economic problem is scarcity (when we do not have enough resources to produce all of the things we would like to have).

6. Making economic decisions

7. Trade-offs Have to take all aspects of transactions into account
Ex: you trade money to buy a product

8. Opportunity cost is the next best thing that you had to give up for the choice you made (includes money and inconveniences)

9. Fixed costs do not change no matter how much is produced
Variable costs change w/the amount produced

10. Fixed Costs + Variable Costs=Total Cost

11. Marginal cost is the cost of producing one more unit of output.
Businesses look at total and marginal cost to determine final cost

12. Cost-Benefit analysis
Econ. model that compares marginal costs and benefits
Benefits should outweigh the costs when making decisions

13. Your role in the economy
U.S. has a market economy
Choices you make affect choices businesses make (like what to make or how much to charge)

14. Market economies are based on capitalism and free enterprise
Incentives try to persuade people to make certain economic decision

15. Making wise choices Rational choice involves consumer’s perceptions
Benefits society by making the best use of scarce resources