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Economics, right!?

Economics, right!?. Is it all about the Benjamins ?. What is economics, anyway?. Economics is the science of how humans divide our scarce resources to fill needs and unlimited wants. In other words…

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Economics, right!?

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  1. Economics, right!? Is it all about the Benjamins?

  2. What is economics, anyway? • Economics is the science of how humans divide our scarce resources to fill needs and unlimited wants. In other words… • Economics is the study, description, and analysis of the ways in which societies produce and distribute goods and services.

  3. What you mean by goods and services? We mean… EVERYTHING Yes, EVERYTHING that is produced in an economy… From an oil change to corn-on-the-cob to national defense, prisons, and hospitals.

  4. What are three things in this cartoon you could not explain to someone?

  5. Turn to the person next to you and compare your list. • If you had two or three in common raise your hand.

  6. The basic question that economists are trying to answer is: “How will we use our scarce resources to satisfy our needs and wants?” • The answer varies… based on values… Fairness Needs Ability Hard Work Equity Status

  7. WHY? WHHHHHHYYYYY? • Is this an exact science? • No! Human behavior is mysterious… predictions but • Economics is the science that specifically works to end hunger, overcome poverty, end crime, understand if a tax cut will really help society and how much? And now the basics…

  8. Two branches of the economic tree… • Microeconomics: Studying the behavior of small economic units, like individual consumers, or specific economic activities or phenomena. • Macroeconomics: Studying whole systems of production and distribution and the relationship between economic sectors. Before we get into that we need some common vocabulary…

  9. Do you remember… • Opportunity Cost? • The cost of the next best alternative. The cost of what you gave up. • Scarcity? • When demand is greater than supply. • There are some rules about scarcity…

  10. Four Laws of Scarcity • 1) In order for something to be scarce,people must first want it. • 2) In order for something to be scarce, some people who want it must be unable to get it. • 3) What is scarce is different at different times and in different places. • 4) Scarcity also involves choosing among a variety of uses for a particular resource.

  11. Needs • Needs or physical needs are things that are necessary for life • People living in groups also have collective needs • Satisfying collective needs improves people’s quality of life.

  12. Physical Needs Collective Needs

  13. Wants • People want many things that arenotnecessary for life. • There are two types of wants the more general… • Psychological wants the more specific… • Economic wants.

  14. Do you want to look like this… Or this…

  15. So how do we do it? • Resources are what people use to make the things that satisfy their needs and wants • The three kinds of resources are • Natural resources • People made resources • Human resources • Management/Entreprenuership

  16. Natural Resources LAND

  17. Human Resources LABOR

  18. People-Made Resources CAPITAL

  19. Economists have goals… • Freedom • Efficiency • Equity • Security • Stability • Full employment • Price stability • Growth • Standard of Living

  20. What about the people? Economists need to have some common assumptions…

  21. People make rational decisions when confronted with scarcity. 1 • Economists try to explain and predict people’s choices and what effects those choices. They must assume that the decisions will be rational.

  22. People have preferences that guide their choices. 2 • People’s likes and dislikes influence the opportunity cost that someone is willing to sustain.

  23. People’s decisions take the form of transactions in the market place. 3 • Studying economics is looking at not only the decision, but the implications of that decision on outside factors.

  24. Economic activity happens in the market. 4 • The market is the place where goods, services, and all the factors of production are bought and sold. Studying the market and how we function in it is very important.

  25. There needs to be a medium of exchange… ours is money! 5 • All modern economies use money as the medium of exchange in the market place.

  26. Everything we will study in one sentence… • People make rational choices, expressing preferences in marketplace transactions that are valued in money.

  27. Write three things you learned today on the same piece of paper from the start of class… • Hand it in on the way out of class!

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