Introduction to Economics Part 1

What is Economics? What is Economics? – Quiz Choose the correct answer 1. Economics is the political science that deals with unemployment, inflation, taxes, business cycles, money, supply, and trade. 2. Economics is the social science that studies money and banking 3. Economics is the social science that examines the interaction of demand and supply 4. Economics is the social science concerned with the problem of scarcity

And the answer is… Economics is the social science concerned with the problem of scarcity What is Scarcity? Not enough resources to meet demand Why do you think scarcity is a problem? Human wants are unlimited, and resources are finite. This means that not everybody can have everything that they want Economics: the study of how people choose to use their scarce resources in an attempt to satisfy their unlimited wants.

4 Definition of Economics The study of how society chooses to allocate its scarce resources to the production of goods and services in order to satisfy unlimited wants

The Study of Economics Macroeconomics The big picture: growth, employment, etc. Choices made by large groups (like countries) Microeconomics How do a single individual, household, firm, industry make economic decisions

ECONOMICS: 5 Economic Questions Society (we) must figure out… WHAT to produce (make) HOW MUCH to produce (quantity) HOW to Produce it (manufacture) FOR WHOM to Produce (who gets what) WHO gets to make these decisions?

What are resources? Definition: The things used to make other goods

ECONOMICS: 5 Economic Questions Society (we) must figure out… WHAT to produce (make) HOW MUCH to produce (quantity) HOW to produce it (manufacture) FOR WHOM to produce (who gets what) WHO gets to make these decisions?

The Four Factors of Production… Land + Labor + Capital + Entrepreneurship

Resources – Factors of Production Natural resources (Land)– “free gifts of nature” Land, minerals, oil, forests, air, and timber Human Resources (Labor)– “mankind’s physical and mental talent” These are the skills people have that are used to produce goods and services. Capital Resources – “manufactured aids to production” Tools, machines, equipment, factories Things used in producing goods and services and getting them to consumers. Entrepreneur – the individual who combines the factors of production in order to produce a good or service. Risk taker, policy maker, and innovator

Would it be possible to start a business without one of these factors? Land – Labor – Capital - Entrepreneurship If you would create any type of business you wanted what would it be and what would you need to get started?