1. Chapter 1 What is Economics?

2. Section 1 An Economic Way of Thinking Economics-the study of the choices that people make to satisfy their needs and wants. Economist-A person who studies these economics choices.

3. Economic Actions Two categories - Microeconomics & Macroeconomics. Microeconomics-is the study of the choices make by economic actors such as households, companies, & individual markets. (micro-means small) Ex. Exxon Corporation is considered a microeconomic topic because only a single economic actor is involved.

4. Macroeconomics Macroeconomics-examines the behavior of entire companies Ex. Unemployment in the United States is a macroeconomic topic

5. Economic Decisions Who make Decisions? Consumers- the people who decide to buy things. Producers- the people who make the things that satisfy consumers’ needs and wants. Consumers choose what to buy, & producers choose what to provide and how to provide it.

6. How do you Make Decisions? Based on your needs and wants. Needs- those goods and services that are necessary for survival, such as food, clothing and shelter. Wants- are those goods and services that people consume beyond what is necessary for survival, ex. Magazines, television sets, & car washes.

7. How do you Make Decisions? (cont’) Goods-are physical objects that can be purchased. Ex. Pizza, bicycle, pair of tennis shoes.

8. How do you Make Decisions? Services- are actions or activities that are performed for a fee. Ex. Lawyers, plumbers, teachers, & taxi cab drivers. Product-refers to both goods & services

9. Economic Resources A resource is anything that people use to make or obtain what they need or want. Factor of Production-Resources that can be used to produce goods and services. Natural resources, Human resources, Capital resources, & Entrepreneurship.

10. NATURAL RESOURCES Natural resources- Items provided by nature that can be used to produce goods and to provide services. Found on earth or in the earth’s atmosphere Ex. Farm land in Ca., trout-filled rivers in Montana, oil fields in OK., Coal mines in WV., Ex. Atmospheric resources include sunlight, wind, & rain.

11. NATURAL RESOURCES A natural resource is considered a factor of production only when it is scarce and some payment is necessary for its use. Ex. The air you breathe on the beach is not a factor of production b/c its is not scarce & you do not have to pay to use it. If you go scuba diving, you have to pay for the bottled air in the scuba tanks.

12. HUMAN RESOURCES Human resource-any human effort exerted during production. Effort can be physical or intellectual. Ex. Assembly-line workers, ministers, & store clerks all are human resources.

13. CAPITAL RESOURCES Capital Resources- the manufactured materials used to create products. Includes capital goods & the money used to purchase them. Capital goods are the buildings, structures, machinery, & tools used in the production process. Ex. Department stores, factories, dams, computers, & hammers.

14. CAPITAL RESOURCES Capital goods are the manufactured resources that are used in making finished products. Consumer goods – finished products- the goods and services that people buy. Bicycle for personal use is a consumer good. Bicycle for messenger service is classified as a capital good.

15. CAPITAL RESOURCES Technology – is the use of technical knowledge and methods to create new products more efficiently. Ex. Some highly automated plants, computers direct production by issuing electronic instructions to robots on assembly lines.

16. CAPITAL RESOURCES Entrepreneurship-the organization abilities and risk taking involved in start a new business or introducing a new product. The goal of entrepreneurship is to develop a new combination of the other factors of production, creating something of value.

17. CAPITAL RESOURCES Entrepreneur – is a person who attempts to start a new business or introduce a new product-risking economic failure in return for the possibility of financial gain.