Presentation on theme: "HOW PEOPLE USE LIMITED RESOURCES TO SATISFY UNLIMITED WANTS"— Presentation transcript:
1 HOW PEOPLE USE LIMITED RESOURCES TO SATISFY UNLIMITED WANTS ECONOMICSSHOW ME THE MONEY!Culturally - How do people survive, or earn a living?DEFINITION:HOW PEOPLE USE LIMITED RESOURCES TO SATISFY UNLIMITED WANTS
2 SCARCITY -the basic concept WHAT DOES LIMITED MEAN?scarce – “not plentiful, rarely seen”?A resource that has a finite supply and provides a valuable useA resource with alternative or competing valuable uses
5 1. WHAT GOODS AND SERVICES ARE PRODUCED? ANSWERS “consumption”What resources are available (Supply) social costWhat technology is available (Supply) social costWhat do people want* (Demand) social benefitWhat they see and knowDEFINITIONSGoods – products or commodities,Physical or tangibleServices – actions or activitiesProvided, Cannot be resold
6 2. How should they be produced and in what quantity? Answers “Production”Determined by the “economic system”Limited by the factors of productionLand: natural resourcesLabor: human input – sweat and/or brainsCapital: resources (tools) made or used by humansEntrepreneurship: individual willingness to take risk; to invent, to innovate, to organize
7 3. FOR WHOM SHALL THEY BE PRODUCED? Answers: “Distribution”Who gets what, and how muchand how do they get it? (how is it allocated)Social/Political Organization
8 Traditional Economy Closely tied to the environment Choices and Social roles determined byCustomBelief systemStatusBirthFamilyGender
9 BASIC ECONOMIC REASONING 1. People make choices2. The choices people make have costs3. People respond to incentives in predictable ways4. People create economic systems that influence individual choices and incentives5. People gain when they trade voluntarily6. People’s choices have consequences that lie in the future
10 1. People make choices People face tradeoffs economize People choose the alternative that seems best to them, because it involves the least cost and the greatest benefitPeople economize by selecting the best combination of costs and benefits
11 2. The choices people make have costs Opportunity costThe cost of something is what you give up to get itAlternative forgoneCost is the second best choice people give up when they make their best choice
12 3. People respond to incentives Incentives are actions or rewards that encourage people to act. When incentives change, peoples behavior changes in predictable waysRational decision-making
13 4. People create economic systems that influence individual choices and incentives How people cooperate is governed by written and unwritten rules. As rules change, incentives change and behavior changesTraditionalClosely tied to the environmentChoices and Social roles determinedby Custom, belief system, birth, family genderMarketMarkets are usually a good [most efficient] way to organize economic activityCommand / Planned : addressesIncome inequality, redistribution of wealth requires government controlMixedGovernments can sometimes improve market outcomes
14 5. People gain when they trade voluntarily Trade can make everyone better offVoluntary trade creates wealthPeople can produce more in less time by concentrating on what they do best.The surplus goods or services they produce can be traded to obtain other valuable goods or services
15 6. People’s choices have consequences that lie in the future Choices are made on the anticipated benefit compared to present circumstancesThe important costs and benefits in economic decision making are those which will appear in the future.Economics stresses making decisions about the future because it is only the future that we can influence. We cannot influence things that have happened in the past.
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