2. Economics and You What is Economics? Why study Economics?

3. We need to make choices all the time! WHY?

4. What is a Want? A want is a desire for goods and services I want to eat a banana.

5. (Unlimited) Wants Human wants are unlimited and can be Human wants are unlimited and can be concrete or concrete or abstract abstract Can you give some examples? Can you give some examples?

6. Which one is a Concrete want and which one is an abstract ? Example 1: I want a sandwich for lunch. I want a sandwich for lunch. Example 2: I need to be loved. This is a concrete want This is an abstract want

7. Wants are also… We always prefer more goods and services We always prefer more goods and services When some of our wants are satisfied, we will always have new wants When some of our wants are satisfied, we will always have new wants So we can never be fully satisfied. So we can never be fully satisfied. I want MORE …!!!

8. Thinking time! Suppose Mary bought 4 ice creams, she said that she had had enough, so her want for ice-cream is limited – no more ice cream?! Suppose Mary bought 4 ice creams, she said that she had had enough, so her want for ice-cream is limited – no more ice cream?! Does her behavior show that human wants are limited? Does her behavior show that human wants are limited?

9. Think about it … What are the means that are needed to fulfill these needs and wants? I want to eat bananas, what should I do?

10. Yes, we use MONEY to buy, but … wait a minute! Before we buy the bananas Some one must need to produce the bananas first What do we need to use to produce bananas?

11. Productive Resources (FOUR Types of Factors of production) CAPITAL: e.g. MACHINES and EQUIPMENT, etc. Man-made resources

12. ENTREPRENEUR : the OWNER of a company Human resources

13. LAND: natural resources e.g. sunlight, air, crude oil, dolphins in the open sea, etc. Natural resources

14. LABOUR : e.g. workers, managers, teachers, etc. Human resources

15. Factors of production Human resources Natural resources Man-made resources LABOUR ENTREPRENEUR LANDCAPITAL Production Goods and services (Output) (Input)

16. What are all these Resources have in common? Resources have either money value (a camera) or non-money value (air, parental love) Directly or indirectly used to satisfy human wants Resources, in general, have alternative uses. Limited supply

17. Unlimited wants Scarcity Limited resources How to satisfy unlimited wants with limited resources? So with unlimited wants and limited resources, we face a problem – the problem of SCARCITY

18. SCARCITY (a relative concept)  the situation in which the limited resources available are insufficient to satisfy the unlimited wants  a universal phenomenon

19. The THREE RICHEST men in the world according to Forbes Bill Gates Carlo Slim Warren Buffett Does the richest men face the problem of scarcity?

20. Carlo Slim, the richest man in the world. In a recent survey in 2010, the estimated value of his personal assets was about US$53.5billion. If I have enough money to satisfy all of my wants, does this mean that I don’t face the problem of scarcity? Why? No. He still has to face the problem of scarcity. Human wants are unlimited.When some wants are satisfied, we develop other ones. Human wants can never be fully satisfied.

21. What seems to be the scarcest thing around? For a lot of people, it is TIME. You can be the richest person on earth and still not have “enough time.” Why is it valuable to you?

22. (Opportunity) cost : When we make a choice, we have to bear a cost – you give up an opportunity of choosing some other things! Choice and (opportunity) cost Choice Unlimited wants Scarcity Limited resources

23. For example, A plot of land could have several possible uses, it can be used to develop, for example: Choice A: a residential building OR Choice B: a commercial building

24. Let’s assume the money used to build a residential building and a commercial building are the same (say, $1 billion). What do the developer have to give up, if he decides to use the land to construct a residential building,? The choice of constructing a commercial building

25. What does that mean? In other words, the cost of building a residential building is to give up the choice of building a commercial building

26. You have two choices of how to spend a Saturday night. 1 st choice: To see a movie 2 nd Choice: Going online I like seeing movie better!

27. Which option will you choose? Why? I like seeing movie better!

28. What is the cost of choosing the above option, i.e. going to see a movie? Going online is the cost of going to see a movie. Why???

29. Choice and Cost Unlimited wants Limited resources Scarcity Choice Chosen option (the BEST choice) COST = (NEXT BEST choice given up )

30. Surfing the Internet at home Singing Karaoke in a friend’s house Playing basketball in a park The 1 st Option The 2 nd Option The 3 rd Option What is the cost of Joey’s decision to surf the Internet at home? Joey As it is the next best choice given up.

31. In other words, the cost of Joey surfing the internet at home is playing basketball in a park. But why NOT all the choices given up?

32. The 2 nd Option Even if Joey does not choose the 1 st option (the BEST option to Joey), she will not choose all the other options to do, she will … only choose the NEXT BEST option – i.e. the 2 nd option !!! Surfing the Internet at home Singing Karaoke in a friend’s house Playing basketball in a park The 1 st Option The 3 rd Option

33. Conclusion Back to the questions: What is economics? Why study economics? All people face the problem of scarcity.

34. Economics tries to uncover the processes that affect how people’s lives come to be what they are; and to identify ways to help improve these processes and in turn better futures