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Introduction to economics:

Introduction to economics:. The start of a great journey!. What is Economics?. Economics: The science of how individuals (and governments) make choices to satisfy wants and needs. Adam Smith:. Modern Free Enterprise (capitalism) Economics is the brain child of Adam Smith

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Introduction to economics:

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  1. Introduction to economics: The start of a great journey!

  2. What is Economics? • Economics: • The science of how individuals (and governments) make choices to satisfy wants and needs.

  3. Adam Smith: • Modern Free Enterprise (capitalism) Economics is the brain child of Adam Smith • Scottish university professor • wrote the book titled “Wealth of Nations” • Details the framework and structure of capitalism in our modern era

  4. Section 1 – Scarcity: The Basic Economic Problem Wants – desires that can be satisfied by consuming a good. Everyone WANTS the new iphone!! Needs – things necessary for survival Everyone NEEDS to eat! Scarcity – the situation that exists when there are not enough resources to meet WANTS scarcity is an ongoing problem that confronts people, businesses and governments

  5. Economics involves: • Examining how individuals, businesses and governments use resources • Organizing, analyzing and interpreting data about those behaviors. • Developing theories and economic laws that explain how the economy works and what might happen in the future

  6. Scarcity: • Principle 1 – People Have Wants • What do YOU want? Principle 2 – Scarcity Affects Everyone • We have limited resources, so we must make choices • What goods are made and what services are provided, based on what you have to work with • Answer Question A at the bottom of page 5

  7. Scarcity Leads to 3 Questions 1) What Will be Produced? • Based on resources available to a person or nation • Some countries allow producers and consumers to decide • Decision also needs to be made on how MUCH to produce 2) How Will it Be Produced? use resources in most efficient way (depends on skill or workforce and technology) 3) For Whom Will it Be Produced? How much should people get and how should they get it? (road systems vs. products) – for everyone or private? pay or get it for free?

  8. Factors of Production – resources needed to produce goods FACTOR 1 – Land FACTOR 2 – Labor FACTOR 3 – Capital FACTOR 4 – Entrepreneurship Read page 8-9 and explain each of these factors

  9. Section 2 – Making Choices • Incentives – benefits offered to encourage a behavior • Utility – benefit gained from use of a good or service • Economize – “make decisions” about what is best

  10. Make a Choice • You have $30 for the week, choose your activities: a. buy 3 song downloads - $3 b. buy a sandwich and soda at WaWa - $7 c. go to the movies - $15 d. go to the park and play basketball - $0 e. buy a new lipstick - $8 f. go out to dinner with friends - $25 g. save the money for a new video game - $30 h. buy a new pair of jeans - $22 i. go to Starbucks 3 times for Frappuccino - $12 What items are most important to you?

  11. Section 3 – Analyzing Production Possibilities • Economic Models – simplified representations of complex economic activities, systems or problems. • Production Possibilities Curve (PPC) – graph used to illustrate impact of scarcity by showing maximum # of goods and services that can be produced.

  12. Graphing a PPC assumes that: • 1) Resources are fixed (cannot be changed) • 2) All resources are fully employed (there is no waste) • 3) Only 2 things can be produced (easies way to graph it is with only 2 items) • 4) Technology is fixed (no way to improve production)

  13. Production Possibilities Curve • PPCs can help a business, government or individual determine how to best use their resources. • This graphs the opportunity cost – what do you have to give up in order to increase or decrease production of each item. • Help determine efficiency Points inside curve – underutilization of resources Points outside curve – production impossibilities

  14. Changing PPCs • With the addition of any of the 4 factors of production, the PPC will shift. • If you have more resources, or use them more efficiently, you can be more productive.

  15. Section 4 – The Economist’s Toolbox • Statistics – numerical data used to see patterns of behavior • Help us make sense of information in order to make decisions • Charts on pg 26 – What can you tell about the world by looking at the charts. (write it down)

  16. Macro vs. Micro • What do those prefixes mean?

  17. Macroeconomics – study of economy as a whole including inflation, unemployment, aggregate supply and demand • Shows the effect of widespread unemployment, general rise in prices and other “big picture” issues

  18. Microeconomics – study of the behavior of individual players in an economy • Specific to individual elements of an economy, how prices are set by businesses, why you spend the money you spend, buying used car vs. new, etc.

  19. Positive v. Normative Economics • Positive – uses scientific methods, can be tested against real world data and proved or disproved • (lottery raises $ for education – can be proved) • Normative – goes beyond facts to ask if actions are good • (lottery places burden on poor, who buy more tickets – is based on values)

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