3.  Economics is how each country deals with the allocation of SCARCE resources for fulfilling a society’s needs and wants. › ALL economic problems deal with scarcity  Scarcity is the lack of goods and resources to meet unlimited wants and needs.

4.  Macroeconomics : is the study of economics on a national or complete scale (tax cuts, unemployment, and entire retail industry)  Microeconomics : is the study of individual companies and people making their own decisions in regards to their best interest (supply and demand, business choices, and where to shop)

5.  All economic problems stem from this economic condition.  Our needs and wants are unlimited, but our resources are limited. › Lack of resources › TINSTAAFL

6.  NEEDS – Basic requirements for survival › Examples: food, clothing, shelter  WANTS – Means of expressing a need. › Example: You may NEED clothing, but you WANT Gap Jeans. › Can be determined based on a person’s budget.

7.  GOODS – Things you can touch, tangible › Consumer Goods – Intended for final use by a consumer (Pizza) › Capital Goods – Intended to produce other goods (Oven) › Durable Goods – A good that lasts three or more years › Nondurable Goods – A good that lasts for less than three years  SERVICES – Things you can’t touch, work performed by someone, Intangible › Examples: a haircut, carwash, concerts, home repair

8. The process of using up goods and services to satisfy needs and wants is called consumption.

9.  What good or service are you going to produce?  Who are you going to produce your good or service for?  How are you going to produce your good or service?

10.  C apital – Goods and machinery used in the production of various goods and services Examples: tools, equipment, factories, bulldozer, cash register  E ntrepreneurs – Risk taker that brings productive resources together to produce something for profit.  L and – Natural Resources, fixed and limited in supply  L abor – Human Resources › Example: workers, skilled and unskilled

11.  Most countries have to make trade-offs. (Give up one thing in order to make something else.)  What we give up is called the opportunity cost. (the next best alternative use of money, time, or resources)

12.  Various combinations of goods and/or services an economy can produce when all productive resources are fully employed.  In other words…in order for an economy to produce more of one thing, if all resources are being used to their maximum, something else must be given up – trade-off/opportunity cost.

13.  The Father of modern day Economics  He wrote a book called the Wealth of Nations  He thought the economy works best when the government stays completely out of it. He called this the laissez-faire or “hands off” approach.  Invisible hand guides the economy.

14.  Actions that take place in one sector of the economy affect other parts of the economy  Interdependent activity goes in a circular motion.  Circular flow of activity takes place in factor markets and product markets. › Factor markets: where productive resources are bought and sold. › Product markets: where producers offer goods and services for sale.