10/22/2014CRC Economics2 What did we talk about last time? Essential information Who Am I? Course Information Who Are You?
10/22/2014CRC Economics3 What do we study this time? Chapter 1 Ten Principles of Economics Introduction: Basic Economic Concepts Goods and services (G&S) Resources Society’s basic problem Basic questions in Economics
10/22/2014CRC Economics4 Do you know … what stuff that we want in life? what we need to produce stuff? how stuff are produced? a society’s basic problem and its solution? the basic questions answered by Economics?
10/22/2014CRC Economics5 1. What stuff do we want in life? In life, we want stuff, that economists call collectively goods and services (G&S).
10/22/2014CRC Economics6 a. Goods Goods, or commodities, are tangible stuff, including durable and non-durable goods. Durable goods Used for more than 1 year Non-durable goods Used for less than 1 year
10/22/2014CRC Economics7 b. Services Services are intangible stuff, such as … Medical careLegal services Education MusicSports Movies
10/22/2014CRC Economics8 2. What do we need to produce G&S? a. Company founder or entrepreneur (a resource) b. Factories/tools or physical capital (a resource) d. Worker skills or human capital (a resource) f. Know-how or technology e. Materials or natural resources c. Workers or labor (a resource) To produce a car, we need …
10/22/2014CRC Economics9 2. What do we need to produce G&S? Resources (also called inputs or factors of production) a. Company founderEntrepreneurEnt f. Know-how (Technology/ Technological knowledge) A c. WorkersLaborL d. Worker skillsHuman capitalH e. MaterialsNatural resourcesN b. Factories / toolsPhysical capitalK Notation
10/22/2014CRC Economics10 a. Entrepreneurs (Ent) Risk takers who organize the production of G&S
10/22/2014CRC Economics11 b. Physical capital (K) The stock of equipment and structures, e.g. factories, tools etc., used to produce G&S
10/22/2014CRC Economics12 c. Labor (L) People’s efforts and time
10/22/2014CRC Economics13 d. Human capital (H) The knowledge and skills acquired through education, training, and experience
10/22/2014CRC Economics14 e. Natural resources (N) Inputs provided by nature, e.g. land, water, trees, oil, etc.
10/22/2014CRC Economics15 f. Technology / Technological Knowledge (A) Society’s understanding of the best ways to produce G&S
10/22/2014CRC Economics16 3. How are G&S produced? ResourcesResourcesResourcesResources OutputG&SOutputG&SOutputG&SOutputG&S Technology N L H K Ent (Technological knowledge)
10/22/2014CRC Economics17 4. What is a society’s basic problem and its solution? Do we want a lot of G&S? Do we have a lot of resources? Our wants of G&S are unlimited. Our resources are limited. Society’s basic problem is scarcity, (We cannot have everything that we want.) Yes. No. i.e. the limited nature of society’s resources.
10/22/2014CRC Economics18 How do societies solve the scarcity problem? By using the principles in Economics, which is the study of how society manages its scarce resources. The economy is similar to a household. The word “Economy,” from “oikonomos” (a Greek word), means “one who manages a household.”
10/22/2014CRC Economics19 4. What are the basic questions answered by Economics? Economics try to answer the following questions: Who will work to produce G&S? What goods/services and how many of them will be produced? What resources should be used in the production of G&S? At what prices should the goods/services be sold?
10/22/2014CRC Economics20 Now you know … what stuff that we want in life. what we need to produce stuff. how stuff are produced. the society’s basic problem and its solution. the basic questions answered by Economics.
10/22/2014CRC Economics21 What did you study this time? Chapter 1 Ten Principles of Economics Introduction: Basic Economic Concepts
10/22/2014CRC Economics22 What will you study next time? Chapter 1 Ten Principles of Economics How do people (as individuals) make decisions? How do people interact? How does the economy as a whole work?