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Chapter 1

Chapter 1. What is Economics?. Section 1 An Economic Way of Thinking. Economics-the study of the choices that people make to satisfy their needs and wants. Economist-A person who studies these economics choices. Economic Actions. Two categories - Microeconomics & Macroeconomics.

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Chapter 1

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  1. Chapter 1 What is Economics?

  2. Section 1 An Economic Way of Thinking • Economics-the study of the choices that people make to satisfy their needs and wants. • Economist-A person who studies these economics choices.

  3. Economic Actions • Two categories - Microeconomics & Macroeconomics. • Microeconomics-is the study of the choices make by economic actors such as households, companies, & individual markets. (micro-means small) • Ex. Exxon Corporation is considered a microeconomic topic because only a single economic actor is involved.

  4. Macroeconomics • Macroeconomics-examines the behavior of entire companies • Ex. Unemployment in the United States is a macroeconomic topic

  5. Economic Decisions • Who make Decisions? • Consumers- the people who decide to buy things. • Producers- the people who make the things that satisfy consumers’ needs and wants. • Consumers choose what to buy, & producers choose what to provide and how to provide it.

  6. How do you Make Decisions? • Based on your needs and wants. • Needs- those goods and services that are necessary for survival, such as food, clothing and shelter. • Wants- are those goods and services that people consume beyond what is necessary for survival, ex. Magazines, television sets, & car washes.

  7. How do you Make Decisions? (cont’) • Goods-are physical objects that can be purchased. • Ex. Pizza, bicycle, pair of tennis shoes.

  8. How do you Make Decisions? • Services- are actions or activities that are performed for a fee. • Ex. Lawyers, plumbers, teachers, & taxi cab drivers. • Product-refers to both goods & services

  9. Economic Resources • A resource is anything that people use to make or obtain what they need or want. • Factor of Production-Resources that can be used to produce goods and services. • Natural resources, • Human resources, • Capital resources, & • Entrepreneurship.

  10. NATURAL RESOURCES • Natural resources- Items provided by nature that can be used to produce goods and to provide services. • Found on earth or in the earth’s atmosphere • Ex. Farm land in Ca., trout-filled rivers in Montana, oil fields in OK., Coal mines in WV., • Ex. Atmospheric resources include sunlight, wind, & rain.

  11. NATURAL RESOURCES • A natural resource is considered a factor of production only when it is scarce and some payment is necessary for its use. • Ex. The air you breathe on the beach is not a factor of production b/c its is not scarce & you do not have to pay to use it. • If you go scuba diving, you have to pay for the bottled air in the scuba tanks.

  12. HUMAN RESOURCES • Human resource-any human effort exerted during production. • Effort can be physical or intellectual. • Ex. Assembly-line workers, ministers, & store clerks all are human resources.

  13. CAPITAL RESOURCES • Capital Resources- the manufactured materials used to create products. • Includes capital goods & the money used to purchase them. • Capital goods are the buildings, structures, machinery, & tools used in the production process. • Ex. Department stores, factories, dams, computers, & hammers.

  14. CAPITAL RESOURCES • Capital goods are the manufactured resources that are used in making finished products. • Consumer goods – finished products- the goods and services that people buy. • Bicycle for personal use is a consumer good. • Bicycle for messenger service is classified as a capital good.

  15. CAPITAL RESOURCES • Technology – is the use of technical knowledge and methods to create new products more efficiently. • Ex. Some highly automated plants, computers direct production by issuing electronic instructions to robots on assembly lines.

  16. CAPITAL RESOURCES • Entrepreneurship-the organization abilities and risk taking involved in start a new business or introducing a new product. • The goal of entrepreneurship is to develop a new combination of the other factors of production, creating something of value.

  17. CAPITAL RESOURCES • Entrepreneur – is a person who attempts to start a new business or introduce a new product-risking economic failure in return for the possibility of financial gain.

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