1. Please take notes on the following slides in your Business notebook
Economics : The Basics!
Please take notes on the following slides in your Business notebook

2. What is Economics?
Economics-Social science which deals with scarce resource allocation (use) for attaining:
1. society’s unlimited needs/ wants
2. greatest/ max. satisfaction for goods/ services
Foundation rests on 2 fundamental facts:
1. Resources = Limited
2. Scarcity-Needs/ wants for goods/ services are unlimited but resources are limited!
Scarcity = There are not enough goods to produce all people’s wants (Not $ lack but resource lack)
Most important fact of Econ!

3. 3 Society Sectors 1. Consumer-Person who buys product
Consumer goods (Durable/ Non-Durable)
2. Business-Capital goods (Machinery, tools, factories, etc.)
3. Government-Public goods (Parks, schools, highways, etc.)

4. Basic Terminology 1. Need-Necessity for life (Food, shelter, etc.)
2. Want-Anything for which is not need (Luxury)
Note: Need and Want are UNLIMITED
3. Goods-Material (Clothing, automobile, food, boat, etc.)
4. Service-Activity (Haircut, legal advice, taxi ride, etc.)
5. Resources-(Factors/ Means of Production) Inputs that go into goods/ services production
Ex. Natural resources, labor, knowledge and capital
Resources = LIMITED

5. 4 Resource Categories
1. Land-(“Nature’s Gifts”) Anything given by Mother Nature that is used in goods/ services production
Ex. Territory, Natural Resources (Oil, timber, iron ore, water, etc.)
2. Labor-Man’s physical/ mental capabilities which are used in goods/ services production
3. Capital-Anything manmade used in goods/ service production
Ex. Machinery, tools, factories, etc.
Financial Capital-$ used to buy tools/ equipment used in production
4. Entrepreneurial Ability-Combines land, labor, capital into goods/ services production
Entrepreneur-Innovator, risk taker, and/or manager (Owner) looking to make profits

6. What’s the Goal of Economics?
Answer: Use scarce resources efficiently in effort to attain satisfaction for society’s unlimited needs, wants for goods/ services
Do best w/ what you have
People have unlimited needs and wants, and using resources wisely to suit this issue
Societies must economize
Economize-Gain society’s greatest satisfaction for needs/ wants through:
a. Full Employment-All resources employed
b. Full Production-Resources are assigned/ combined properly

7. What Must Societies Avoid?
1. Underemployment-All resources are not employed in production
2. Underproduction-Resources are not assigned/ combined properly
Note: Again, goal of economizing is Full Employment and Full Production!

8. 2 Broad Areas of Study in Econ
1. Macroeconomics-Overall econ activity/ interaction between major economy sectors
2. Microeconomics-Individual unit’s activity in economy
vs.

9. 3 Basic Questions of Econ
1. What to produce?
2. How to produce?
3. For whom to produce?

10. 4 Steps of Scientific Method
1. Observe-Look at world around you
2. Hypothesis-Make educated guess based on observation
3. Test Hypothesis-Set up experiment to see if hypothesis is accurate or not
Perform multiple times under similar conditions to find cause and effect
4. Accept, Revise or Reject Hypothesis
Was your hypothesis right or wrong? Why?

11. Looking at the 2 Types of Tools of Economic Reasoning
1. Factual-Includes measurable units:
a. Statistics
b. History
c. Institutions
2. Theoretical-Includes ideas:
a. Concepts
b. Models
c. Variables

12. Factual Tools of Econ Reasoning
1. Statistics-2 types:
a. Data-Numbers used in Econ measurements
Ex. Production, Prices, Interest Rates, etc.
b. Methods to find data (Finding Average)
Necessary to fully understand situation to find best solution
2. History-Using knowledge gained from stories of past to help influence present and future
Ex. Developed Countries using harmful pesticides when they were younger and less wealthy (Short term gain but long term damage
Should Less Developed Countries do same?
3. Institutions-Decision making units, established practices/ laws and cultural behavior
Ex. Gov’t Policy, Internal Revenue Service, Military, Media, etc.

13. Theoretical Tools of Econ Reasoning
1. Concepts-Word/ Phrase expressing Econ idea
2. Models-Simplified representation of the real world showing relationship between 2 or more variables
Ex. Words, Math Formulas, Graphs, etc.
Variables-Quantity that changes due to changes in other related items
Ex. Price of Tractor and Amount of People Buying Tractor

14. Why Use Graphs? Answer = Adds sense/ meaning to information
If you can understand it, you are better able to change it

15. Types of Graphs
1. Charts-Graph that represents data/ information visually
A. Pie Chart- a circular chart showing percentages
B. Time Series-Line graph showing changes in value over time
C. Column Chart-chart using columns to show value
D. Bar Chart-Column chart turned sideways
E. Area Chart- chart using area of space to represent value
2. Diagrams-Visual graph/model that show relationship between 2 or more variables
May or may not have values that can actually be measured

16. Pie Chart

17. Time Series

18. Column Chart

19. Bar Chart

20. Area Chart

21. Diagram

22. Direct & Inverse Relationships
Direct-Variable Relationship where as one’s value increase/ decrease so does the other (Same for Both)
Inverse-Variable relationship where as one’s value increases the other decreases (Opposite)

23. Free vs. Econ Goods
Free Good-Production/ consumption good that does not have direct cost
Economic Good-Any good/ service that sells for price (Not free)

24. What’s an Economist Do?: Econ Reasoning
1. Analysis-Through research assumes how people/ groups will behave
Explain events
2. Predict outcomes of what will happen under different circumstances
Ex. What will happen if people chose A over B?
3. Value Judgment- Which is best choice to make? Why?
What’s more important, people or profits?
Recommend policy

25. Any Questions?