What is Economics?

Economics is the social science concerned with the problem of scarcity

What is Scarcity? Not enough resources to meet demand Why do you think scarcity is a problem?

What else is Economics? Economics is common sense made confusing. Economics is the science of decision making.

What is Economics?

The social science concerned with how individuals and societies decide how to satisfy there unlimited wants given our limited resources. I can’t buy a car if I don’t have an income!

The science of decision making How to make decisions

“The Economic Problem”

Scarcity… What is it? Limited resources but unlimited wants

Unlimited wants VS Limited Resources You can’t buy 10 candy bars if the store only has 5

candy bars to sell. Can’t buy 3 burgers if you only have enough money

for 1. What are some things that you “want” to have? Do

you have the resources to purchase them?

Needs VS Wants What are some of your needs…wants.

Scarcity means…

We must use things efficiently in order to maximize the number of goods and services we can produce. Don’t waste…

The Economic Problem (Scarcity)– We can’t have everything we want!! Because of this… we need to make

choices. What we want (need) VS what we can give

up (live without)

Resources – Factors of Production

Natural resources (Land)– “free gifts of nature” Land, minerals, oil, forests, air, and timber

Capital Resources – “manufactured aids to production” Tools, machines, equipment, factories Things used in producing goods and services and

getting them to consumers.

Human Resources (Labor)– “mankind’s physical and mental talent” These are the skills people have that are used to

produce goods and services.

Entrepreneur – the individual who combines the factors of production in order to produce a good or service. Risk taker, policy maker, and innovator

Opportunity Cost

The true cost of choosing one alternative over the other. Trade offs – giving up one thing in order to

obtain another.

The one that you give up when the choice is made. Give an example of a time when you had to

make an economic choice. What was the opportunity cost?

“Opportunity cost is the opportunity lost”

College Vs. Work

What are you planning on doing after you finish high school? College or work

What factors did you consider when making this decision? money now or money later Family

How will this decision impact your future?

What are the trade offs of this decision? Opportunity cost?

Types of Economics

Macroeconomics – branch of economics that deals with economic theory and the economic decisions of large bodies like the government. Theories of Economics Countries and their governments Trade between countries

Microeconomics – branch of economics that deals with behavior and decisions of smaller unit like individuals and businesses. Families, businesses, and communities Domestic economies

Business Cycle

Parts of the Business Cycle

Peak (boom)– Highest point in the economic cycle. Economy is at its best and will likely begin

to contract.

Recession (contraction)– decline in the economies performance that could lead to depression. Not long term and does not always impact

other economies

Trough (depression)– A sustained economic downturn that impacts our economy and that of other countries. Lowest economic point

Recovery (expansion)- Economic activity begins to pick up and depression begins to end. Economic growth occurs

3 Basic Economic Questions

What to produce? With limited resources, deciding what is

needed the most is often a factor in determining what will be produced. What is the need or want of this product?

What is the point of making a product that no one is going to buy. Businesses need to make money…so they choose products that people want.

3 Basic Questions Cont…

How should it be produced? Technology, labor, capital, ect. getting the lowest cost to make the product. Are we going to make the product from scratch or

will a machine be making the product. What will each option cost?

Will having new technology allow us to lower our expenses?

3 Basic Questions Cont…

Whom should it be produced for? Who is going to use this product?

Did Apple market the ipod to the large population of elderly people in the U.S. or the youth? Why?

Most goods and services are distributed to individuals through a price system. If you want it and can afford to buy it…you will.

Products can also be distributed through other means; force, first come, lottery, majority, ect.

Review – With a partner answer the following questions on a sheet of notebook paper

What is Economics?

What the 3 components of the “Economic Problem”?

What are the four factors of production?

What are trade offs and opportunity costs?

What are the three basic economic questions?

Define microeconomics and macroeconomics.