Presentation on theme: "Introduction to Economics “The Basic Concepts of Economics”"— Presentation transcript:
1 Introduction to Economics “The Basic Concepts of Economics”
2 IntroductionMicroeconomics = 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 EconomyInvisible Hand vs. Government
3 Natural ResourcesThey were here long before man/woman ever set foot on earthNatural Resources A Gift of NatureHumans learned how to extract resources from the land and transform them from their original state
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 togetherIf 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 resourcesMining one ton of a nonrenewable resource depletes that resource by one tonBefore 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 resourcesChoices can be painful
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 CostThe value of the next best alternative that had to be given up for the alternative that was chosen.
23 Decisions at the Margin “How Much”? Is a decision at the margin.“Either-or” vs. “How Much”“How Much” decisions involve a trade-offA comparison of costs vs. benefits
24 Incentives MatterWhen 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.