1. Fundamental Economics
Economics pt. 1, Lesson 1

2. Economic Choices We use economics everyday
Economics: study of how we make decisions about how to distribute limited resources
Needs vs. Wants; difference
The fundamental economic problem is the issue of scarcity
Scarcity: when we do not have enough resources to produce all of the things we would like to have

3. What, How, For Whom HOW should we get energy?
Unlimited wants + limited resources = scarcity; what does society do
Each society has to choose WHAT to produce; choices?
Each society must choose HOW to produce; examples?
After goods are produced each society must decide FOR WHOM are these goods for; in the US we use a price system
These are hard questions that every country must answer
HOW should we get energy?

4. Using Economic Models
Economists often formulate theories about how economies work from the data they collect
These theories become economic models
Economic models: simplified representations of the real world that used to help predict what will happen in the economy
Models are based on assumptions; are these models facts?
NOT this type of model

5. Market Economy
The United States has a market economy, often described as capitalism
Market economy: system in which supply, demand, and prices help people make decisions and allocate resources
Capitalism: private citizens own most, if not all, means of production; meaning?
Businesses are allowed to compete for profit with a minimum of government interference
Most economic decisions are made by individuals looking out for their own and their families’ self interest
The choices you make and businesses make affect what you buy and what businesses produce

6. Understanding Your Role
Keeping informed is important to understanding economics; ways to get informed?
Smart citizens should understand how incentives affect people’s economic decisions
Incentives: rewards that are offered to get people to take certain actions
The role of government should be to maintain competitive markets, not to help one group over another
Government can support their goals by offer incentives or punishing; carrot or stick approach