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What is Economics?

What is Economics?. How can we make the best economic choices?. Economics: A Definition. The study of how people make choices when they face a limited supply of resources. Two basic Economic Ideas. Scarcity:

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What is Economics?

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  1. What is Economics? How can we make the best economic choices?

  2. Economics: A Definition • The study of how people make choices when they face a limited supply of resources.

  3. Two basic Economic Ideas • Scarcity: • Definition - limited amounts of goods and services are available to meet unlimited wants. • Forces us all to make choices. • Our wants are greater than our needs. • Forces us to decide what is most important to us.

  4. Two basic Economic Ideas • Trade-Offs: • The alternatives that we give up when we choose one course of action over another. • Giving up one thing for another. • Involved in every decision.

  5. Guided Question: How does scarcity force people to make economic choices? • Decisions are not easy. • There are many, many ways you can spend your money. • When you make a decision, you get something for it, but you also give something up. VS.

  6. NEED • Something essential for survival. • You CAN NOT live without it!!

  7. WANT • Something you desire. • Not necessary for survival.

  8. Wants & Needs = Goods & Services Goods Services Actions or activities that one person performs for another. Work done for someone for a fee. • Physical objects that people, businesses or governments buy. • What people want, but must purchase.

  9. Why are resources limited? Resources Shortage NOT scarcity. Can be renewed or replaced. Example: you want a new, very popular video game, but the stores are out of them. This is a shortage because the game maker can make more. • Anything people use to make things or to do work. • They are limited. • Our wants and needs are always greater than the resources we have to meet them. • People, businesses and governments all have choices to make.

  10. Entrepreneur • A person who decides how to combine resources to create goods and services. • Factors of Production: • Land – all natural resources used to produce goods and services. • Labor – the effort people devote to tasks for which they are paid. • Capital – any human-made resource used to produce goods and services. • Physical Capital – human-made objects used to make goods and services (machinery). • Human Capital – what a worker gains from education and experience (going to college).

  11. Guided Question: How does opportunity cost affect decision making? • Each possible use of the same resource is an opportunity. • Opportunity Cost – the most desirable alternative given up as a result of a decision. • Example: after high school you have many choices: 1. Go to college. 2. Work full time. • If you go to college, you won’t have much money. If you work full time, you will make money immediately, but overall college graduates earn more money than those without a college degree. • There is a cost for giving up one choice or the other opportunity.

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