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Splash Screen. Chapter Introduction Section 1: Scarcity and the Science of Economics Section 2: Basic Economic Concepts Section 3: Economic Choices and Decision Making Visual Summary. Chapter Menu.

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  1. Splash Screen

  2. Chapter Introduction Section 1: Scarcity and the Science of Economics Section 2: Basic Economic Concepts Section 3: Economic Choices and Decision Making Visual Summary Chapter Menu

  3. Congratulations on being selected to head up the prom committee! Now you must decide on location, music, and refreshments. What factors do you need to consider when making your choices? In groups of four, determine your budget and identify possible locations, music providers, and food. Read Chapter 1 to learn how your prom selections, like all economic decisions, require you to make choices about how to best use limited resources. Chapter Intro 1

  4. Scarcity is the basic economic problem that requires people to make careful choices about how to use limited resources. Chapter Intro 2

  5. Chapter Intro-End

  6. Section Preview In this section, you will learn why scarcity is the basic economic problem that faces every society and why scarcity requires us to make choices. Section 1-Preview

  7. Content Vocabulary • scarcity • economics • need • want • factors of production • land • capital • capital good • labor • entrepreneur • gross domestic product (GDP) Academic Vocabulary • resource • comprehensive Section 1-Key Terms

  8. A B C If the only pizza restaurant in the area produced 40 pizzas a night and usually sold out quickly, would you be willing to pay more to guarantee that you would get a pizza? A. Definitely B. Possibly C.Definitely not Section 1

  9. The Fundamental Economic Problem Societies do not have enough productive resources to satisfy everyone’s wants and needs. Section 1

  10. The Fundamental Economic Problem(cont.) • The fundamental economic problem facing all societies is that of scarcity. • Few people are satisfied with the things they have. • Society does not have enough resourcesto produce all the things people would like. Scarcity Section 1

  11. The Fundamental Economic Problem(cont.) • The study of how scarcity affects most decisions we make is economics. • Economists talk about people’s needs and wants. A need is necessary for survival. • A want is something we would like but not necessary for survival. Section 1

  12. The Fundamental Economic Problem(cont.) • Everything we do has a cost, due to limited resources. • TINSTAAFL—There is no such thing as a free lunch. Section 1

  13. A B Which do you purchase more often? A.Things you want B.Things you need Section 1

  14. Three Basic Questions Scarcity forces every society to answer the basic questions of WHAT, HOW, and FOR WHOM to produce. Section 1

  15. Three Basic Questions (cont.) • We live in a world of scarce resources. Scarcity means that three questions should be answered. • What to produce • How to produce • For whom to produce Section 1

  16. A B C What is the best way to increase production of a good or service? A.Hire more employees B.Purchase more equipment C.Replace management Section 1

  17. The Factors of Production Four factors of production—land, capital, labor, and entrepreneurs—must be present to produce goods and services. Section 1

  18. The Factors of Production (cont.) • All four factors of production are required to produce goods and services. • Land • Capital(sometimes calledcapital goods) • Labor • Entrepreneurs The Factors of Production The Global Economy & YOU Section 1

  19. A B C Which of these do you think is the most important factor of production? A.Land B.Capital C.Entrepreneurs Section 1

  20. The Scope of Economics Economics analyzes how societies satisfy wants through careful use of relatively scarce resources. Section 1

  21. The Scope of Economics (cont.) • Economics is a social science—it deals with the behavior of individuals as they satisfy unlimited and competing wants through careful use of scarce resources. Section 1

  22. The Scope of Economics (cont.) • Four key elements to the study of economics • Description • Gross domestic product (GDP) is a key measure of a nation’s economic output. • Analysis • Explanation • Prediction Section 1

  23. A B C D Which of the following does economics describe? A.Jobs B.Taxes C.Government spending D. All of the above Section 1

  24. Section 1-End

  25. Section Preview In this section, you will learn about some key economic terms and concepts. Section 2-Preview

  26. Content Vocabulary • good • consumer good • durable good • nondurable good • service • value • paradox of value • utility • wealth • market • factor market • product market • economic growth • productivity • human capital • division of labor • specialization • economic interdependence Section 2-Key Terms

  27. Academic Vocabulary • transferable • accumulation • mechanism Section 2-Key Terms

  28. A B C Do you think of “big business” or large corporations when you hear the word economics? A. Always B. Sometimes C.Never Section 2

  29. Goods, Services, and Consumers Economic products are goods or services that are useful, relatively scarce, and transferable. Section 2

  30. Goods, Services, and Consumers (cont.) • Economics is concerned with economic products—goods and services that satisfy our wants and needs. They command a price because they are scare and useful. Section 2

  31. Goods, Services, and Consumers (cont.) • There are different economic products that consumers use. • A goodis a useful, tangible item. • Capital goods are manufactured goods used to produce other goods and services. • Consumer good • Durable good Section 2

  32. Goods, Services, and Consumers (cont.) • Nondurable good • Service is a work performed for someone. Section 2

  33. A B Which do you consume or indulge in more often? A.Goods B.Services Section 2

  34. Value, Utility, and Wealth The value of a good or service depends on its scarcity and utility. Section 2

  35. Value, Utility, and Wealth (cont.) • In economics, value refers to worth that can be expressed in dollars and cents. • Adam Smith, a Scottish social philosopher, came up with the term paradox of valuein 1776. Section 2

  36. Value, Utility, and Wealth (cont.) • Scarcity by itself does not fully explain how value is determined. • For a good or service to have value, it must also have utility,which varies by person. Section 2

  37. Value, Utility, and Wealth (cont.) • A nation’s wealth is comprised of all tangible goods. • This, however, does not mean that services are not useful or valuable. Section 2

  38. A B C Which of the following has the most value and utility to your family? A.Automobile B.Kitchen appliances C.Television Section 2

  39. The Circular Flow of Economic Activity The economic activity in markets connects individuals and businesses. Section 2

  40. The Circular Flow of Economic Activity(cont.) • The circular flow of economic activity generates wealth. • The market is the key to this circular flow. • Individuals earn their incomes in factor markets. The Circular Flow of Economic Activity Section 2

  41. The Circular Flow of Economic Activity(cont.) • After individuals earn their incomes in factor markets, they spend it in product markets. • Businesses then use this money to produce more goods and services. • This cycle of economic activity repeats. Section 2

  42. A B C D In which market does your school engage? A.Cyberspace B.Local C.National D. All of the above Section 2

  43. Productivity and Economic Growth A nation’s economic growth is due to several factors. Section 2

  44. Productivity and Economic Growth (cont.) • When the circular flow becomes larger, with more factors of production, goods, and services flowing in one direction and more payments in the opposite direction, there is economic growth. • Productivity is the most important factor contributing to economic growth. Section 2

  45. Productivity and Economic Growth (cont.) • Ways to increase productivity • Invest in human capitalsuch aseducation, training, and health-care • Division of laborand specialization Profiles in Economics:Adam Smith Effect of Education on Income Section 2

  46. Productivity and Economic Growth (cont.) • The U.S. economy has a remarkable degree of economic interdependence. As a result, events in one part of the world may have a dramatic impact here. Section 2

  47. A B C Which investment we make today will generate higher returns in the future? A.Education B.Health-care C.Technology Section 2

  48. Section 2-End

  49. Section Preview In this section, you will learn that you face trade-offs and opportunity costs whenever you make an economic decision. Section 3-Preview

  50. Content Vocabulary • trade-off • opportunitycost • production possibilities frontier • economic model • cost-benefit analysis • free enterprise economy • standard of living Academic Vocabulary • alternative • assumption Section 3-Key Terms

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