1. Introduction to Economics “The Basic Concepts of Economics”

2. Introduction
Microeconomics = The study of how individuals make decisions and how these decisions interact.
Macroeconomics = The study of the overall economy and its’ ups and downs.
Market vs. Command Economy
Invisible Hand vs. Government

3. Natural Resources
They were here long before man/woman ever set foot on earth
Natural Resources A Gift of Nature
Humans learned how to extract resources from the land and transform them from their original state

4. Trees = Paper

5. Sand = Glass

6. Sun = Energy

7. We Live in a Finite World
No matter how much we conserve, if we keep consuming natural resources at our current rate, they will run out.

8. A Consumer Society!
The world’s people have consumed as many goods and services since 1950 as all previous generations put together
If everyone on our planet consumed resources at the rate of U.S. citizens, we would need 3 more planet earth’s to provide for all 6 billion people.

9. Renewable vs. Nonrenewable Resources
Conservation can the supply of renewable resources
Mining one ton of a nonrenewable resource depletes that resource by one ton
Before society has depleted a certain resource we may have abandoned using it.
Examples = Coal and Flint

10. Economics is the Study of Choices
Productive Resources: Anything that people can use to make or obtain what they want.
In economics we study how we use scarce resources
Choices can be painful

11. Land

12. Labor (The available time of workers)

13. Capital ($, machinery, buildings, and other man-made productive assets)

14. Human Capital (The educational achievements and skill of workers)

15. How Do We Satisfy Our Wants?
Suppose we had an infinite supply of resources. Would a problem exist?
YES!
The basic problem in economics is not a lack of resources, but our limitless wants.

16. Scarcity
Unlimited Wants vs.
Limited Resources

17. Core Economic Principle #1 People Choose
We always want more than we can get and productive resources (human, natural, capital) are always limited. Therefore, because of this major economic problem of scarcity, we usually choose the alternative that provides the most benefits with the least cost.

18. Wants vs. Needs Needs = Survival needs, food, shelter, clothing, etc.
Wants = Anything else

19. We’re perpetually in a state of hunger.
We always want more stuff.
As a result, scarcity governs us.
Scarcity forces us to make choices and prioritize needs and wants.

20. Core Economic Principle # 2 All Choices Involve Costs
The opportunity cost is the next best alternative you give up when you make a choice. When we choose one thing, we refuse something else at the same time.

21. Opportunity Cost
The value of the next best alternative that had to be given up for the alternative that was chosen.

22. When You Choose You Lose

23. Decisions at the Margin
“How Much”? Is a decision at the margin.
“Either-or” vs. “How Much”
“How Much” decisions involve a trade-off
A comparison of costs vs. benefits

24. Incentives Matter
When changes in the available opportunities offer rewards to those who change their behavior, we say that people face new incentives.
Economists are skeptical of any attempt to change people’s behavior that doesn’t change their incentives.