2. Economics LAP 6 Are You Satisfied? Economics and Economic Activities

3. Objectives Discuss the nature of economics. Explain economic activities.

4. Discuss the nature of economics. Objective

5. If you were to find a magic lamp with a genie inside, what would your wishes be?If you were to find a magic lamp with a genie inside, what would your wishes be? No one can identify all of his/her wishes and dreams.No one can identify all of his/her wishes and dreams. It’s purely human nature.It’s purely human nature. Some might even say that it’s economics!Some might even say that it’s economics!

6. What Is Economics? The study of how to meet unlimited, competing wants with limited resources.The study of how to meet unlimited, competing wants with limited resources. The process of deciding how to “get the most with the least”— obtaining the greatest satisfaction from the least amount of resources.The process of deciding how to “get the most with the least”— obtaining the greatest satisfaction from the least amount of resources.

7. Economics in Action Countries ask, “How can we meet our citizens’ wants with the resources we have available?”Countries ask, “How can we meet our citizens’ wants with the resources we have available?” Businesses ask, “What products should we produce and/or provide to consumers?”Businesses ask, “What products should we produce and/or provide to consumers?” Consumers ask, “How should we spend our incomes to get the goods and services we want?”Consumers ask, “How should we spend our incomes to get the goods and services we want?”

8. What Are Wants? Wants are desires for things that may or may not be required.Wants are desires for things that may or may not be required. Wants can be divided into two categories:Wants can be divided into two categories:  Economic wants: desires for things that can only be obtained by spending money  Noneconomic wants: desires for things that can be obtained without money We will be discussing economic wants.We will be discussing economic wants.

9. Characteristics of Wants UnlimitedUnlimited  Everyone always has wants. ChangingChanging  Wants change as situations change. CompetingCompeting  We must choose which wants to satisfy at any one time because our resources are limited.

10. Economic Resources ResourcesResources  Items used to accomplish other activities such as producing or providing goods and services Three categories of resources:Three categories of resources:  Natural resources  Items found in nature that are used to produce goods and services  Human resources  People who are valued for the physical and mental work that they do to produce goods and services  Capital goods  All of the manufactured or constructed items that are used to produce goods and services

11. Our Resources Are Limited Our natural resources are limited by:Our natural resources are limited by:  An increasing global population  The difficulty or cost involved in obtaining them  A lack of technology in some developing countries  Natural resources that may be running out  Weather conditions  The environment

12. Our Resources Are Limited Our human resources are limited because:Our human resources are limited because:  Only some people are willing and able to work.  Many parts of the world are experiencing worker shortages in certain professions because of:  A lack of special training  Qualified potential employees who do not live where the job opportunities exist

13. Our Resources Are Limited Our capital goods are limited by:Our capital goods are limited by:  The amount of labor and natural resources available to produce them  The money available to purchase them  A lack of technology in some parts of the world

14. Economics: The Study of Scarcity Scarcity is caused by the gap between unlimited wants for goods and services and limited resources.Scarcity is caused by the gap between unlimited wants for goods and services and limited resources. Our goods and services are scarce because not everyone can have everything s/he wants.Our goods and services are scarce because not everyone can have everything s/he wants. Scarce resources must be allocated to their best use.Scarce resources must be allocated to their best use. Economizing:Economizing:  Deciding which goods and services to purchase or provide so that the most satisfaction can be obtained  Trying to obtain the greatest satisfaction from limited resources

15. Making Good Choices Opportunity cost:Opportunity cost:  The benefit that is lost when you decide to use scarce resources for one purpose rather than for another  Examples:  If you study for an economics exam rather than going out with friends, your opportunity cost is the lost benefits of socializing with others.  If a retailer closes on Sundays, its opportunity cost is the lost benefits received from being open for business on Sundays.  If a government spends more money on defense than on education, its opportunity cost is the lost benefits from education.

16. Making Good Choices Before making a decision, you should examine the opportunity costs involved.Before making a decision, you should examine the opportunity costs involved. Economic choices involve trade-offs.Economic choices involve trade-offs.  We must be willing to give up all or part of one thing in order to get something else.  Our trade-offs should be based on the opportunity costs involved.

17. Basic Economic Questions What will be produced?What will be produced?  What and how many goods and services should the society produce?  How should the society allocate its limited resources between production of capital goods and consumer goods?

18. Basic Economic Questions How will the products be produced?How will the products be produced?  What are the best, most efficient ways to use the society’s limited resources to produce its products?

19. Basic Economic Questions How will the products be allocated?How will the products be allocated?  How will the goods and services be divided among the people?  How will individuals, businesses, and governments share the products?

20. Economic Decision-Making The heart of economics is decision-making.The heart of economics is decision-making. The objective of studying economics is to prepare for:The objective of studying economics is to prepare for:  Effective decision- making  Responsible citizenship in society

21. Explain economic activities. Objective

22. Getting What We Need We rely on others to provide us with some of the goods and services that we desire.We rely on others to provide us with some of the goods and services that we desire. Goods, services, and resources must move from one person to another.Goods, services, and resources must move from one person to another. Four economic activities make this movement possible.Four economic activities make this movement possible.  Consumption  Production  Exchange  Distribution

23. Economic Activities: Consumption Consumption is the economic process or activity of using goods and services.Consumption is the economic process or activity of using goods and services. The ultimate goal of all economic activity is consumption.The ultimate goal of all economic activity is consumption. Anyone who uses goods and services is a consumer.Anyone who uses goods and services is a consumer. People consume goods and services to satisfy their wants and needs.People consume goods and services to satisfy their wants and needs.

24. Economic Activities: Production Production is the economic process or activity of producing goods and services.Production is the economic process or activity of producing goods and services. For consumption to occur, goods and services must be produced.For consumption to occur, goods and services must be produced. Individuals who make or provide goods and services are called producers.Individuals who make or provide goods and services are called producers. Producers transform resources into more valuable goods and services.Producers transform resources into more valuable goods and services. The relationship between consumption and production must be balanced.The relationship between consumption and production must be balanced.

25. Economic Activities: Exchange Producers, consumers, and resource owners exchange money payments.Producers, consumers, and resource owners exchange money payments. Most resource owners require some form of payment—usually money— for the use of their resources.Most resource owners require some form of payment—usually money— for the use of their resources.  Resource owners are people and organizations who provide human resources, natural resources, or capital goods for use in production.  Payments for human resources:  Wages  Salaries  Profits  Payments for capital goods:  Interest  Rent  Producers make these money payments to get resources for production.

26. Economic Activities: Exchange After acquiring enough resources, producers are able to produce goods and services.After acquiring enough resources, producers are able to produce goods and services.  Consumers make money payments to obtain these goods and services.  This money payment is the price of the good or service. Exchanges among producers, consumers, and resource owners result in a circular movement of resources, goods, services, and money payments.Exchanges among producers, consumers, and resource owners result in a circular movement of resources, goods, services, and money payments.

27. Economic Activities: Distribution Distribution is the economic process or activity by which income is divided among resource owners and producers.Distribution is the economic process or activity by which income is divided among resource owners and producers. Money received by resource owners and producers is known as income.Money received by resource owners and producers is known as income.  Resource owners use income to buy more goods and services.  Producers use income to buy more resources.

28. Economic Activities: Distribution Resource owners and producers often engage in a tug of war over how to divide the income they receive from consumers.Resource owners and producers often engage in a tug of war over how to divide the income they receive from consumers.  If resource owners don’t think their incomes are large enough  They might not share their resources with producers anymore Which would cause production to cease Which would cause production to cease  If producers don’t think their incomes are large enough  They might not make any more goods and services Which would cause consumption to cease Which would cause consumption to cease  The way in which they divide their income depends on their society’s economic system.

29. Money Values Consumers pay more for things that bring them greater satisfaction.Consumers pay more for things that bring them greater satisfaction. Goods and services that give little satisfaction are less expensive.Goods and services that give little satisfaction are less expensive. 3.2GHz The values attached to money payments depend on:The values attached to money payments depend on:  Productivity  Productive resources usually earn more than less productive ones.  Demand  As people’s demand for resources, goods, and services increases, so do the money payments they are willing to make.  Availability or supply  Resources, goods, and services that are abundant are valued less than scarce ones.

30. Everyone participates in economic activities. What does your school consume? What does the school produce? What resources does the school use? Where do these resources come from? How does the school take part in exchange and distribution activities?

31. The Howell family has owned Happy Acres Farm for 150 years. The state intends to build a highway across the farm. The Howell’s don’t want to sell Happy Acres. The state is exercising its power of eminent domain to seize the farm without the family’s consent.   The state will pay the family for the property.   The state—not the Howells— gets to set the purchase price for the farm. Is that fair? Should the state be allowed to seize the property? What do you think?

32. MBA Research Acknowledgments Original Developers Christopher C. Burke, April J. Miller, MBA Research Version 1.0 Copyright © 2010 MBA Research and Curriculum Center®

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