What is Economics? Unit 1 Ms Stewart Ms Stewart

Economics is about… Trying to satisfy unlimited wants Trying to satisfy unlimited wants Making tradeoffs Making tradeoffs Getting the most out of what we have Getting the most out of what we have Link to clip: tefJiwQ&feature=related tefJiwQ&feature=related tefJiwQ&feature=related

“Wants” The need or desire for goods and/or services The need or desire for goods and/or services They are UNLIMITED They are UNLIMITED Divided into “Physical” wants and “Psychological” wants Divided into “Physical” wants and “Psychological” wants

“Physical” Wants Also referred to as “Needs” Also referred to as “Needs” Things that are necessary to sustain human life Things that are necessary to sustain human life Examples: air, water, food, clothing, shelter Examples: air, water, food, clothing, shelter Determined by where we live. (how?) Determined by where we live. (how?)

“Psychological” Wants All other wants that are not essential to sustaining life All other wants that are not essential to sustaining life Examples: ipods, brand name clothing, a boat, trips, etc. Examples: ipods, brand name clothing, a boat, trips, etc.

“Goods” Tangible or “concrete” items that satisfy wants Tangible or “concrete” items that satisfy wants Examples: food, clothing, cars, etc. Examples: food, clothing, cars, etc.

“Services” Intangible items that satisfy wants Intangible items that satisfy wants Consumed at the time of production Consumed at the time of production Examples: medical check-up, hair cut, concert, etc. Examples: medical check-up, hair cut, concert, etc.

“Resources” Things used to produce goods and services. Things used to produce goods and services. Divided into “Natural”, “Capital”, “Human” and “Entrepreneurial” Resources Divided into “Natural”, “Capital”, “Human” and “Entrepreneurial” Resources They are LIMITED They are LIMITED Link to clip: JiwQ&feature=related JiwQ&feature=related JiwQ&feature=related

“Natural Resources” Materials or substances that occur in nature and can be used for economic gain Materials or substances that occur in nature and can be used for economic gain Examples: water, land, forests, minerals, oil/gas, even sunlight and wind! Examples: water, land, forests, minerals, oil/gas, even sunlight and wind!

“Capital Resources” A “good” that is used in the production of other goods A “good” that is used in the production of other goods Examples: factories, machinery, equipment, tools Examples: factories, machinery, equipment, tools

“Human Resources” The skills and efforts of people used in the production of goods. The skills and efforts of people used in the production of goods. Example: employees Example: employees

“Entrepreneurial Ability” Someone who recognizes a profit opportunity, is able to organize resources, and is willing to accept risk. Someone who recognizes a profit opportunity, is able to organize resources, and is willing to accept risk.

Example: Hockey Stick Wood used to make the hockey stick = Natural Resource Wood used to make the hockey stick = Natural Resource Saw used to cut the wood = Capital Saw used to cut the wood = Capital Resource Resource Person who operates the saw = Person who operates the saw = Human Resource Human Resource

“Scarcity” The core of Economics The core of Economics Simply: because wants are unlimited and resources are limited, there will never be a time when all wants are satisfied. Simply: because wants are unlimited and resources are limited, there will never be a time when all wants are satisfied. There has to be “want” in order for scarcity to exist. There has to be “want” in order for scarcity to exist.

Examples Canned snow for sale in Antarctica = no scarcity because no one would want it Canned snow for sale in Antarctica = no scarcity because no one would want it Having $1.00 to buy lunch with = scarcity because you probably won’t be able to satisfy your hunger (want) with only $1.00 (resource) Having $1.00 to buy lunch with = scarcity because you probably won’t be able to satisfy your hunger (want) with only $1.00 (resource)

“Decision Making” The act of dealing with the problem of scarcity The act of dealing with the problem of scarcity Choosing the best way to satisfy the most wants with our limited resources Choosing the best way to satisfy the most wants with our limited resources

“Opportunity Cost” The benefit lost of choosing The benefit lost of choosing The opportunity cost of an activity is the value of the next best alternative The opportunity cost of an activity is the value of the next best alternative

Example You need to chose between having a salad, a sandwich, or a bowl of soup for lunch. You need to chose between having a salad, a sandwich, or a bowl of soup for lunch. You prefer salad over soup, but you prefer the sandwich most of all. You prefer salad over soup, but you prefer the sandwich most of all. You choose the sandwich, the opportunity cost is…the salad (the next best alternative) You choose the sandwich, the opportunity cost is…the salad (the next best alternative)

Economics is… The study of human activity involved in using scarce resources to satisfy wants.