1. Economics

2. What is Economics?
What does the word ‘Economics’ mean to you?

3. What is Economics? Economics
The study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources

4. What is Economics? The Fundamental Economic Problem
Grass is always greener on the other side…
Scarcity
the condition that results from society not having enough resources to produce all the things people would like to have

5. What is Economics? Needs and Wants Need Want
A basic requirement for survival and includes food, clothing, shelter
Want
A way of expressing a need

6. What is Economics? Three Basic Questions What to produce?
How to produce it?
For whom do we produce it?

7. What is Economics? What to produce?
What should society use its resources to produce?
A society cannot have everything its people want, so it must decide what to produce
Housing
Military equipment

8. What is Economics? How to produce it?
should factory owners use mass production methods that require a lot of equipment and few workers, or should they use less equipment and more workers?

9. What is Economics? For whom to produce?
After a society decides what to produce and how, the things produced must be allocated to someone

10. What is Economics?
The reason people cannot satisfy all their wants and needs is the scarcity of productive resources
Factors of Production
resources required to produce the things we would like to have
Land
Capital
Labor
Entrepreneurs

11. Factors of Production Land “gifts of nature”
Natural resources not created by human effort
Deserts, fertile lands, forests, minerals, cattle, whales, sunshine, climate
Because only so many natural resources are available, we can think of them as being in limited supply

12. Factors of Production Capital Capital Goods Financial capital
Tools, equipment, and factories used in the production of goods and services
Financial capital
The money used to buy the tools and equipment used in production

13. Factors of Production Labor
People with their effort, ability, and skills
This group will vary over time due to population growth, immigration, famine, war, disease

14. Factors of Production
Entrepreneurs
Risk-takers in search of profits

15. Factors of Production Production
When all factors of production – land, capital, labor, and entrepreneurs – are present, production, or the process of creating goods and services, can take place

16. The Scope of Economics
Economics is the study of human effort to satisfy seemingly unlimited wants with scarce or limited resources
A social science because it deals with the behavior of people as they deal with this basic issue
Description, analysis, explanation, and prediction

17. The Scope of Economics Description
The description of economic activity
GDP or Gross Domestic Product
The dollar value of all final goods and services, and structures produced within a country’s borders in a 12 month period

18. The Scope of Economics Analysis
Why are prices of some items high while others low?
Why do some people earn higher incomes than others?
How do taxes affect people’s desire to work and save?

19. The Scope of Economics Prediction
Economics is always concerned with prediction
What will raising taxes do to consumers?
Who do we raise taxes for?
Economics deals with the study of what is or what tends to be
The study of economics helps us to become more informed citizens and better decision makers

20. Basic Economic Concepts
Goods, Services, Consumers
Why do economic products require prices?
These goods and services are useful
These resources are scarce
These goods and services are transferrable to others

21. Goods, Services, Consumers
Consumer Goods
Capital Goods
What are goods that can fall under both categories?
Durable vs. nondurable…

22. Goods, Services, Consumers
Work that is performed for someone
Intangible, something that cannot be touched
Examples?
Doctors, lawyers, teachers
Haircuts, home repairs, concerts

23. Goods, Services, Consumers
“The consumer is a person who uses goods and services to satisfy wants and needs. As consumers, people indulge in consumption, the process of using up goods and services in order to satisfy wants and needs.”

24. Value, Utility, Wealth
Consider this: Why do some things have more value than other things?

25. Value, Utility, Wealth Paradox of Value
The situation where some necessities have little monetary value, whereas some non-necessities have a much higher value
Can you think of any examples that fit this model?
Classic example is water and diamonds!

26. Trade-off: alternative choices
Opportunity Cost: the cost of the next best alternative use of money, time, or resources

27. Trade-Offs and Opportunity Cost
Let’s say I was going to give you $50
I’m not… This is strictly hypothetical
I want you to list 5 things you would buy with that $50
Not 5 things that total $50, but 5 $50 things
Answer the following questions for each thing you wrote down:
Is it less than $50?
Is it durable?
Would my parents approve?
Are there other expenses necessary?
Can you use it any time?
Based on your answers for each of the $50 things, I want you to rank which thing you would buy first, then second, then third,…