 Mr. Bordelon University High School

 What is economics?

o The study of how people, businesses, and nations make choices to satisfy their wants and needs.

 Utility

o Economicky way of saying “satisfaction.”

 A limited amount of resources to meet an unlimited amount of needs and wants.

o Scarcity.

 The amount of choices available at any one time.

o Trade-offs.

 Opportunity cost

o The value of the best alternative not chosen.

 The resources used to make goods and services.

o Factors of production

 What are the factors of production?

o Land o Labor o Capital o Entrepreneurship

 What is land?

o Baby, don’t hurt me, don’t hurt me no more.

 What is land? o Natural resources.

 What is labor?

o Paid human work/effort.

 What is capital?

o Manmade resources.

 Physical capital  Human capital

 Physical capital o Tools, machinery, factories  Human capital

 Physical capital o Tools, machinery, factories  Human capital o Knowledge, skills, experience, education

 Entrepreneur

o Risk-taker o Person who makes the decisions about land, labor, and capital to make products.

 Hypothetical model of an economy that produces two very different products, and shows us the opportunity cost of producing one product or another.

o Production Possibilities Curve (PPC)

 Underutilization

o Seen on a PPC, when an economy does not use all of the available resources to produce all the goods it can. Inefficient.

 Efficiency on a PPC

o Shown on the curve itself, any point along the curve is efficient. It is efficient because that economy is using all the resources possible to make products.

 Impossibility on PPC

o Outside of the actual curve, a point of impossibilities occurs because there is no ability to reach that level of production given current resources.

 What is the law of increasing opportunity costs?

o When we switch from one item of production to another, it costs us more and more to do so. o Gives the PPC it’s actual curve shape. Resources are not perfectly adaptable, so it’s not a one-to-one exchange.

 Moving from Point C to Point A, what is the opportunity cost of producing guns?

o 20 butter. o We’re producing 100 guns, up from 25, for a gain of 75 guns. o To do that, we have to give up making 20 butter.

 Moving from Point A to Point B, what is the opportunity cost of producing butter?

o 20 guns. o We’re producing 45 butter, up from 30, for a gain of 15 butter. o To do that, we must give up 20 guns.