What is Economics? Economics – how people use their scarce resources to satisfy their unlimited wants.
Economic Problem Although your wants, or desires, are virtually unlimited, the productive resources available to help satisfy these wants are scarce.
Economic Problem Scarcity – The condition facing all societies because there are not enough productive resources to satisfy people’s unlimited wants.
Economic Questions 1.What to produce? 2.How to produce? 3.For whom to produce?
Productive Resources Four types of productive resources. 1.Land –Natural resources or gifts from nature (oil, water, coal, etc.). 2.Labor –Human resources – the number of people willing and able to work and all of the abilities of these people to include their health, strength, motivation, education and skills. 3.Capital –Goods and services buildings, equipment, roads, dams, and machinery. 4.Entrepreneurship –The ability to organize and manage resources or “good business sense”.
Economic Systems 1.Traditional – resources are allocated by inheritance, is based on primitive methods and tools and is strongly connected to subsistence farming based on custom and traditions. 2.Market – most of the decisions of what to produce, how to produce and for whom to produce are made by individuals and firms. 3.Command – government officials make most of the decisions about what to produce, how to produce, and for whom to produce. 4.Mixed – some economic decisions are made by individual and private firms, but some are also made by government officials either through rules and regulations or through government owned firms.
Producers and Consumers In a market economic system, producers and consumers play a large role in the function of the economy. Producers –Use scarce resources to produce goods and services which they offer to sell to consumers. Consumers –Purchase goods and services to satisfy their economic wants.
Producers and Consumers Opportunity Cost –The value of the next best alternative that must be given up when scarce resources are used for one purpose instead of another. –Every choice that is made has an opportunity cost for making that choice.
Supply –The amount of a good or service that a producer is willing and able to offer for sale at each possible price during a given time period. Demand –The quantity of a good or service that a buyer is willing and able to buy at all possible prices during a given time period. Producers and Consumers
Equilibrium price –Price at which the quantity demanded by buyers equals the quantity supplied by sellers. Producers and Consumers Equilibrium price
Personal Finance How does economics effect my life? Making money or income! –There must be an incentive to be productive and go to work. –Incentives can be positive or negative. –Remember there is an opportunity cost for every decision we make.
What are the choices we have when we receive income? Spend Save Invest Personal Finance
Questions If you have a question or do not understand any of the material we have covered please raise your hand and I will help you.