1. Economics
The study of how scarce, or limited resources are used to satisfy people’s unlimited material wants and needs. How people make decisions in a world of scarcity.

2. Scarcity
There are not enough, nor can there ever be enough, goods and services to satisfy the wants and needs of all individuals, families, and societies.

3. Limited resources to satisfy wants
Unlimited wants
Limited resources to satisfy wants
Choose between alternatives

4. Scarcity and Choice Scarce Goods Limited Resources
Food (bread, milk, meat, eggs, vegetables, coffee, etc.)
Clothing (shirts, pants, blouses, shoes, socks, coats, sweaters, etc.)
Household (tables, chairs, rugs, beds, goods dressers, television sets, etc.)
Space exploration
Education
National defense
Recreation
Leisure time
Entertainment
Clean air
Pleasant (trees, lakes, rivers,
environment open spaces, etc.)
Pleasant working conditions
Land (various degrees of fertility)
Natural (rivers, trees, minerals, Resources oceans, etc.)
Machines and other human-made physical resources
Non-human animal resources
Technology (physical and scientific “recipes” of history)
Human (the knowledge, skill, resources and talent of individuals)

5. Tradeoffs Choices involve tradeoffs and consequences. - give up to get
It involves a value judgment.
- decide the relative importance of alternatives

6. Opportunity Cost
What must be given up to get one more unit of another good or service
Involves evaluating the costs and benefits of choices.
There is no such thing as a free lunch.

9. Productive Efficiency
Goods and services are produced at the lowest cost.
It also means doing the job they were trained or designed to do

10. Equity Should every person receives as much as every other person? or
Should people receive based on their relative need for the goods and services? or
Should people be rewarded for their contribution to the production?

11. Factors of Production 1. 2. 3. 4.
Land
Labor
Capital
Entrepreneurship

12. Payment to Factors 1. 2. 3. 4. Rent Wages and Salaries Interest
Profits

13. Developing Economic Theories
1. Determining variables to study
Prices
Incomes
Age groups
Population
Government actions
Independent vs Dependent -

14. Methods 2. Make Assumptions eg. Ceteris Paribus
(other things being equal)
- only consider changes to one variable
like Price
see Independent variables a little later

15. “Need facts to support theories and theories to make sense of facts.”
DATA
3. Gather data
“Need facts to support theories and theories to make sense of facts.”
4. Study the data
a. Inductive
Use facts to develop a model
Take a survey and study the results
b. Deductive
See if the facts support a hypothesis
Start with a theory and see if facts support it

16. CONCLUSIONS 5. Make Conclusion a. Principle - relationship
b. Theory – string of principles
c. Law –theory proven to hold true most times

17. policy
6. Set a Policy.
The cause of most
disagreement

18. Presenting results 1. As a theory or law. The Law of Demand
As the price of a good rises, the quantity people will want to buy (demand) will fall.
The Law of Supply
As the price of a good rises, the quantity producers will want to sell (supply) will rise.

19. Presenting results 2. As a picture.
Illustrating the relationship between 2 variables
Eg. Price and Quantity

20. Other things being equal*, as price increases,
The Law of Demand
Other things being equal*,
as price increases,
the corresponding quantity
demanded falls
(*price is the only variable
that is changed)

21. Selling Quantity Price Demanded
The Demand Schedule
Selling Quantity Price Demanded
$ 5 10
$ 4 15
$ 3 25
$ 2 40
$ 1 60

22. The Demand Curve Graphing: Price Quantity -Plot the points
-Connect the dots $6 $5
Downsloping left
to right $4 $3
Demand
Demand $2 $1 10 20 30 40 50 60
Quantity

23. Economic graphs Independent Variable - Price, wages, $$$$$ - Y axis
- Quantity, workers,
- X axis

24. Economic graphs Direct Relationship
- Graph slopes up from left to right
Inverse Relationship
- Graph slopes down from left to right

25. Production possibilities
Assumptions
All resources are fixed in quantity
All resources are fully employed
Existing technology is fixed.
You have a choice of 2 goods to produce

26. Production possibilities
Table
Pizzas (10,000)
Road Pavers
Opportunity Costs?

27. Production possibilities
Curve (or Frontier)
Result of combination: A- B- C- D- 10
Future Growth A 9 D 7
Less Growth
Road Pavers
Capital good B 4 C
Unemployment
Use up resources 1 2 3 4
Pizza
Consumer good

28. 1. When an economist states that a good is scarce, he means that:
a. Production cannot expand the availability of the good.
b. It is rare.
c. Desire for the good exceeds the amount that is freely available from nature.
d. People would want to purchase more of the good at any price.
2. The highest valued alternative that must be given up in order to choose an action is called its
a. opportunity cost.
b. utility
c. scarcity
d. ceteris paribus