1. The study of how people choose to use their limited resources to satisfy their unlimited wants.

2. A system used to manage limited resources for the production, distribution, and consumption of goods and services.

1)Economics and 2)Economy

1. The condition that results because people have limited resources but unlimited wants.

2. Tradeoff is giving something up to get something else.

1)Scarcity and 2)Tradeoffs

1. A way to compare the cost of an action with the benefits of that action.

2. What are some costs and benefits to sleeping an hour later in the morning?

Cost-benefit Analysis

• Scottish born philosopher and political economist.

• “Father of modern economics”

Adam Smith

1.Micro looks at decisions made by individuals, households, and businesses

2.Macro focuses on the workings of the economy as a whole.

Microeconomics vs. Macroeconomics

1. The willingness and ability to take risks involved in starting and managing a business.

Entrepreneurship

1. A model that shows all combinations of two products that can be produced with the resources and technology currently available.

Production Possibilities Frontier (PPF)

Production Possibilities Frontier (PPF)

• Economic Equity – The fairness with which an economy distributes its resources and wealth.

• Economic Systems – A society’s way of coordinating the production and consumption of goods and services.

Economic Systems

• Traditional economy – An economic system in which decision about production and consumption are based on custom and tradition.

• Command economy – An economic system in which decisions about production and consumption are made by a powerful ruler or government.

Economic Systems

• Market economy – An economic system in which economic decisions are left up to individual producers and consumers.

• Mixed economy – An economic system in which both the government and individuals play important roles in production and consumption.

Economic Systems

• Free enterpirse system – An economic system in which the means of production are mostly private owned and operated for profit.

Economic Systems

1.Goods

2.Services

3.Productivity

4.Opportunity Cost

Review Terms