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Unit 1: Basic Economic Concepts

Learn essential economic terminology such as utility, scarcity, and investment. Explore factors of production like land, labor, capital, and entrepreneurship along with examples of goods versus services. Understand the difference between explicit and implicit costs. Discover the concept of profit and the role of entrepreneurs in the economy. Dive into the world of economics with clear explanations and practical insights.

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Unit 1: Basic Economic Concepts

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  1. Unit 1: Basic Economic Concepts “Econ, Econ” Econ

  2. Economic Terminology Utility = Satisfaction! Marginal = Additional! Allocate = Distribute!

  3. Scarcity occurs at all times for all goods. Scarcity vs. Shortages • Shortagesoccur when producers will not or cannot offer goods or services at current prices. Shortages are temporary. Price vs. Cost What’s the price? vs. How much does that cost? Price= Amount buyer (or consumer) pays Cost= Amount seller pays to produce a good Investment Investment= the money spent by BUSINESSES to improve their production Ex: $1,000 new computer, $1 Million new factory

  4. Goods vs. Services Give examples… Goods= physical objects that satisfy needs and wants • Consumer Goods- created for direct consumption (example: pizza) • Capital Goods- created for indirect consumption (oven, blenders, knives, etc.) • Goods used to make consumer goods Services= actions or activities that one person performs for another (teaching, cleaning, cooking)

  5. Accountants vs. Economists Accountants look at only EXPLICIT COSTS. • Explicit costs are the traditional “out-of pocket costs” of decision making. • Ex: Going to Disneyland Economists look at the EXPLICIT COSTS and the IMPLICIT COSTS. • Implicit costs are the opportunity costs such as forgone time and forgone income. • Ex: Peyton Manning leaves the NFL to open a taco shop.

  6. The 4 Factors of Production

  7. The Four Factors of Production • Producing goods and services requires the use of resources- DUH!. • ALL resources can be classified as one of the following four factors of production: Land Labor Capital Entrepreneurship

  8. The Four Factors of Production Land= All natural resources that are used to produce goods and services. Anything that comes from “mother nature.” (Water, Sun, Plants, Oil, Trees, Stone, Animals, etc.) Labor = Any effort a person devotes to a task for which that person is paid. (manual laborers, lawyers, doctors, teachers, waiters, etc.)

  9. The Four Factors of Production Two Types of Capital: 1. Physical Capital- Any human-made resource that is used to create other goods and services (tools, tractors, machinery, buildings, factories, etc.) 2. Human Capital- Any skills or knowledge gained by a worker through education and experience (college degrees, vocational training, etc.)

  10. Program for International Student Assessment (PISA) is a worldwide evaluation of 15-year-old school children's scholastic performance

  11. The Four Factors of Production • Entrepreneurship= ambitious leaders that combine the other factors of production to create goods and services. • Examples-Henry Ford, Bill Gates, Inventors, Store Owners, etc. Entrepreneurs: • Take The Initiative • Innovate • Act as the Risk Bearers So they can obtain _________. PROFIT Profit=Revenue - Costs

  12. The Factors of Production

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