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CRC Economics

What did we talk about last time? Essential information • Who Am I? • Course Information • Who Are You? CRC Economics

What do we study this time? Chapter 1 Ten Principles of Economics Introduction: Basic Economic Concepts • Goods and services (G&S) • Resources • Society’s basic problem • Basic questions in Economics CRC Economics

Do you know … • what stuff that we want in life? • what we need to produce stuff? • how stuff are produced? • a society’s basic problem and its solution? • the basic questions answered by Economics? CRC Economics

1. What stuff do we want in life? • In life, we want stuff, that economists call collectively goods and services (G&S). CRC Economics

a. Goods • Goods, or commodities, are tangible stuff, including durable and non-durable goods. Durable goods Non-durable goods Used for more than 1 year Used for less than 1 year CRC Economics

b. Services • Services are intangible stuff, such as … Education Medical care Legal services Movies Music Sports CRC Economics

2. What do we need to produce G&S? b. Factories/tools or physical capital (a resource) a. Company founder or entrepreneur (a resource) c. Workers or labor (a resource) f. Know-how or technology d. Worker skills or human capital (a resource) e. Materials or natural resources CRC Economics To produce a car, we need …

2. What do we need to produce G&S? Resources (also called inputs or factors of production) Notation a. Companyfounder Entrepreneur Ent b. Factories / tools Physical capital K c. Workers Labor L d. Worker skills Human capital H e. Materials Natural resources N f. Know-how (Technology/ Technological knowledge) A CRC Economics

a. Entrepreneurs (Ent) • Risk takers who organize the production of G&S CRC Economics

b. Physical capital (K) • The stock of equipment and structures, e.g. factories, tools etc., used to produce G&S CRC Economics

c. Labor (L) • People’s efforts and time CRC Economics

d. Human capital (H) • The knowledge and skills acquired through education, training, and experience CRC Economics

e. Natural resources (N) • Inputs provided by nature, e.g. land, water, trees, oil, etc. CRC Economics

f. Technology / Technological Knowledge (A) • Society’s understanding of the best ways to produce G&S CRC Economics

3. How are G&S produced? Resources Output G&S N L Technology Ent H (Technological knowledge) K CRC Economics

4. What is a society’s basic problem and its solution? Yes. No. • Do we want a lot of G&S? • Do we have a lot of resources? Our wants of G&S are unlimited. Our resources are limited. Society’s basic problem is scarcity, i.e. the limited nature of society’s resources. CRC Economics (We cannot have everything that we want.)

How do societies solve the scarcity problem? • By using the principles in Economics, which is the study of how society manages its scarce resources. • The economy is similar to a household. • The word “Economy,” from “oikonomos” (a Greek word), means “one who manages a household.” CRC Economics

4. What are the basic questions answered by Economics? • Economics try to answer the following questions: • Who will work to produce G&S? • What goods/services and how many of them will be produced? • What resources should be used in the production of G&S? • At what prices should the goods/services be sold? CRC Economics

Now you know … • what stuff that we want in life. • what we need to produce stuff. • how stuff are produced. • the society’s basic problem and its solution. • the basic questions answered by Economics. CRC Economics

What did you study this time? Chapter 1 Ten Principles of Economics Introduction: Basic Economic Concepts CRC Economics

What will you study next time? Chapter 1 Ten Principles of Economics • How do people (as individuals) make decisions? • How do people interact? • How does the economy as a whole work? CRC Economics

See You! Take Care! CRC Economics

What did we talk about last time?