Introduction to Economics What is Economics? Introduction to Economics

The Definition of Economics The study of how people’s needs and wants are provided What is a want? A want is everything people desire beyond basic goods and services that they need. Wants are unlimited Needs are unlimited Production- changing resources into goods that satisfy needs and wants of people and businesses Profit- money left after all costs of production have been paid (wages, rent, taxes and interest)

What are some examples of needs and wants? Food Water Shelter Clothing Wants New car Computer Movie tickets New Ipod/MP3

4 Reasons why wants and needs are virtually unlimited Goods wear out and need to be replaced New or better products become available People get fed up with what they already own An increase in salary causes the expectations of the consumer to rise

What are resources? Anything that people can use to make or obtain what they need or want Four factors of production: Land- natural resources such as land, forests, oil and water Labor- the work that people do Capital- money, tools, machinery, factories Entrepreneurship- ability of people to start their own new business

What are the three questions about resources? Scarcity- A state in which people do not and cannot have enough income, time or other resource to satisfy their every desire Economic Problem The basic problem is that there are limited resources for infinite human wants (reflects scarcity)

3 Basic Economic Questions What shall be produced? How shall goods be produced? For whom shall goods be produced?

Intro. To Supply and Demand Supply- amount of a product offered for sale Demand- amount of a product consumers want to buy If demand for an item goes up, prices rise If supply for an item goes up, prices go down