WHAT IS ECONOMICS? 1 C H A P T E R

ECONOMICS The social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants.

ECONOMICS The social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants.

WHY STUDY ECONOMICS Most __________ decisions involve economics. An understanding of economics and government are the keys to participatory citizenship. Learn analytical and observational skills that are important in the workplace. Business managers or owners need these skills and understanding. Make better financial decisions with your investments. Foundation for careers in accounting, business, finance, marketing, or public policy.

THE FOUNDATION OF ECONOMICS SOCIETY HAS VIRTUALLY UNLIMITED WANTS...

BUT LIMITED OR SCARCE RESOURCES! SOCIETY HAS VIRTUALLY UNLIMITED WANTS... THE FOUNDATION OF ECONOMICS

GOODS & SERVICES PROVIDE... UTILITY

WANT GOODS & SERVICES PROVIDE... UTILITY

WANT vs. NEED GOODS & SERVICES PROVIDE... UTILITY

THE ECONOMIC WAY OF THINKING Scarcity The world has limited resources. These resources are desirable. TINSTAAFL  There is no such thing as a free lunch

WHAT IS THE DIFFERENCE BETWEEN A TRADE-OFF AND OPPORTUNITY COST? Trade-Off An exchange of one or more thing(s) in return for another. Opportunity Cost The value of the next-highest valued alternative or the forgone cost.

WHAT IS THE DIFFERENCE BETWEEN A TRADE-OFF AND OPPORTUNITY COST? Trade-Off An exchange of one or more thing(s) in return for another. Opportunity Cost The cost of passing up the next best choice.

FRIDAY NIGHT OPTIONS Go out with friends Stay home and watch TV Go on a date Study economics Attend the basketball game The one we pick is our choice, the rest become Trade-offs. The “next best” alternative becomes the Opportunity Cost.

FRIDAY NIGHT OPTIONS Go out with friends The one we pick is our choice, the rest become Trade-offs. The “next best” alternative becomes the Opportunity Cost.

GO OUT ON A DATE The Opportunity Cost of going out on a date is what you’ve lost by not going out with friends.  Excitement  Fun Your decision was based on getting more utility on your date. That’s the “incentive”

ANY OTHER COSTS? Dating is expensive. Let’s say you spend $30. You could have spent that $30 on something else.

SO OUR OPPORTUNITY COST IS…? The lost fun you would have had with your friends. The cash you spent on your date.