1. What is Economics?
Chapter 1

2. Sec. 1 Scarcity and the Science of Economics
Scarcity is the condition that results from society not having enough resources to produce all the things people would like to have.
What is Economics?
The branch of social science that deals with the production, distribution and consumption of resources.

3. Needs v. Wants
Need is a basic requirement for survival and includes food, clothing, and shelter.
Want is a way of expressing a need.
EX. House is a basic need, a mansion is a want.
Food, basic need for survival, to satisfy this need, a person may want a pizza.
Buying an affordable t-shirt is a need, a “Calvin Klein” or “Armani” is a want.

4. 3 Basic Economics Questions
What to Produce?... Food, clothing, housing? For low, middle, upper-income?
How to Produce? …. More mass production methods and few workers? OR More workers and less equipments?
For Whom to Produce?... Who will buy this product? (social class, male/female, ethnicity group)

5. Factors of Production
These are resources required to produce the things we would like to have.
1. Land: “gift of nature” or natural resources.
2. Capital: tools, equipment, machinery, and factories used in the production of goods and services.
-Financial capital- the $ used to buy the tools and equipment used in production.
3.Labor: People w/ all their effort, abilities, and skills.
4. Entrepreneurs: risk-taker of profits who does something new with exciting resources.

6. What is GDP? -Gross Domestic Product
Dollar value of all final goods and services, and structure provided within a country’s borders in a year.

7. Four main elements to the study of economics:
1. Description: Description of economic activity.
Ex. Gross Domestic Product (GDP)
2. Analysis: Answer economic questions. Help us discover how things work and how things happen.
Ex. Why do some people earn higher income than others?
How taxes affect people’s desire to work and save?
3. Explanation: After understanding how things work, an explanation is essential for communication.
4. Prediction: Help predict what will happen in the future, as well as consequences of different courses of action.
Scope of Economics

8. “THERE IS NO SUCH THING AS A FREE LUNCH” (TINSTAAFL)
Is buy “one, get one free” ….really FREE???
Someone has to pay for the production in some way.

9. Sec. 2 Basic Economic Concepts Goods, Service, and Consumers
Economic Products- good and services that are useful, relatively scarce, and transferable to other.
-a person can not get enough to satisfy wants and needs
Goods: Any material item.
- Consumer good is intended for final use by individual.
EX. Shoe, car.
- Capital good is when manufactures goods are used to produce other goods and services.
EX. Oven use to bake cookies
2. Service: work performed by someone
3. Consumers: person who uses goods and services to satisfy wants and needs.

10. Values, Utility, and Wealth
Value refers to a worth that can be expressed in dollars and cents.
Paradox of Value is the situation where some necessities, such as water, have little value, and some non-necessities, such as diamonds have a higher value.
Utility is the capacity to be useful and provide satisfaction.
Wealth is the accumulation of those products that are tangible, scarce, useful, and transferable from one person to another.

11. Productivity & Economic Growth
Eco. Growth- occurs when a nation’s total output (production) of goods and services increases over time causing the Circular Flow of Economic to increase.
Factors responsible for eco growth:
Productivity- when a product is used efficiently. Ex If a company usually produced 500 units in one period, and if it produced 510in the next period…productivity went up.
Division of labor- worker who perform few tasks many times every day is likely to become more proficient than a worker who performs hundreds of different tasks.
Specialization- factors of production perform task better than other.
ex. Land: Texas specializes in oil/ Idaho specializes in potatoes.
Capital: robots are built to perform tasks (assembly lines)
Human Capital- sum of all skills, abilities, health, and motivation of people.
Economic Interdependence- rely on other to, and other rely on us, to provide the goods and services we consume.

12. The Circular Flow of Economics Activity
Factor Markets: markets where productive resources are brought and sold.
-Entrepreneurs hire employers, acquire land in return of rent, and borrow money for interest.
Individuals- receive income from resource market they spend it in product market
Product Markets: Where producers sell their goods and services to consumers.
- the $ that individuals receive from business in the factor market returns to businesses in the product markets
Businesses: use this money to produce more goods and services.

13. Laissez-faire “let it be”
Philosopher
Wealth of Nations
Laissez-faire “let it be”
Adam smith

14. Sec. 3 Economic Choices and Decision Making
Trade-Offs:
Alternative choices people face in making economic decisions.
Opportunity Cost:
Is the cost of the next best alternative among a person’s choice.
Is the money, time, and recourses a person gives up, or sacrifices, to make his financial choice.
Time: The opportunity cost of taking an art class, is the math or science that you could not take at the same time.

15. Trade-Off Decision-Making
For your birthday, your parents give you $100 gift. You would like to purchase the following items, think how you can spend your money the best way possible.
Which is more durable?, are there additional cost?, is it less than $100?
Alternatives:
- Several songs from ITunes
- Concert Tickets
- Jeans
- Cell Phone
- Pair of Shoes

16. Production Possibilities
Production Possibilities Frontier- is a diagram representing various combinations of goods and/or service an economy can produce when all productive resources are fully employed.