PAHS Chapter 1 & 2 Economics Economics Uncle Sam wants you to do better in economics.

“No horn of plenty” Scarcity Choices What is given up ECONOMICS Unlimited Needs and Wants Demand In other words “THIS is not the case”. Choices L imited R esources Supply

Economicsacademic disciplinemost discussed Economics is the academic discipline most discussed by the general public. least understood[“Language of graphs”] It is also one of the least understood. [“Language of graphs”] The economist’s lab is the real world. They don’t conduct controlled laboratory experiments. They are predicting human behavior. Physicists explore the physical world. Economics as a social science looks Physicists explore the physical world. Economics as a social science looks at the behavior of people in the marketplace. at the behavior of people in the marketplace. Economics is not an “exact science” but it gives “likely results”.

SOCIETY HAS VIRTUALLY UNLIMITED WANTS...

NECESSITIES Food Clothing Shelter Luxuries V..

Food, clothing, shelter, Chrysler 300, mansion, Nintendo DS, jewelry, iPod, projector, digital camera, good health, children, camcorder, laptop warmth, indoor plumbing, rollerblades, a sense of personal worth, Plasma TV, literacy, high economics grade, cell phone, compact discs, Wii “Need” those first three to survive. Unlimited Human Wants Limited Resources Land, L abor, C apital, E ntrepreneur R ent, W ages, I nterest, P rofits

Basic Economic Choices What to produce How to produce Who receives What, how, & for whom. Answers Determine The Type of Economic System MarketTraditionalCommand

. Economics Economics – the study of the choices people make in an effort to satisfy their unlimited needs & wants from limited (scarce) resources. Good tangible Good is a physical object (tangible) that can be purchased. seen and felt [These can be seen and felt – car, book ] Product Service useful laborintangible Service is useful labor done for a fee (intangible). [These are activities, not items – lawyer or doctor services] Are the following a good or a service? Watch? Watch Repair? Hamburger? Education? Basketball? Clothing? Bicycle? Hair cut? Garbage pickup? Jumpdrive? Producers (suppliers)make goods/svcs Producers (suppliers) – people who make goods/svcs. Consumersbuy and use goods/services Consumers – people who buy and use goods/services. Supplier Consumer Econ

. Real Capital v. Financial Capital FINANCIAL CAPITAL [stocks, bonds, and money] REAL CAPITAL [tools, machinery, & factories] Can produce something directly with these Can’t produce anything directly with these

. Do the Benefits outweigh the cost? Scales of Economics Expected marginal benefits Expected marginal costs Choices are primarily marginal – not all or nothing.

20 Three Basic Questions The Three Basic Questions... Whathowfor whom What, how, & for whom 1. What will be produced?

The Three Basic Questions How will the goods be produced? 1. What will be produced?

The Three Basic Questions How will the goods be produced? 1. What will be produced? 3. Who will get the goods & services?

Most needy or most money LimitedResources UnlimitedWants Choices WHAT G/S to produce? WHO will receive the G/S produced? [Eskimo/pygmy] Answers to the above determine: ECONOMIC SYSTEMS 3 BASIC ECONOMICQUESTIONS TRADITIONAL FREE MARKET COMMAND HOW will the G/S be produced?