Economics

What is Economics? The study of how we make decisions in a world where resources are limited. Science of decision-making

Wants v. Needs Needs – anything or any resource needed for survival –Examples include…. Wants – anything or any resource not necessary for survival that people would like to have –Examples include…..

Fundamental Economic Problem Scarcity –Occurs when there are not enough resources to produce the products, goods, or services we would like to have –What types of products are scarce in the U.S.?

Scarcity = Alternatives Scarcity of $$ leads the consumer to compare prices, making choices based on limited resources What economic choices do societies face?

Unlimited Wants Scarcity What to Produce How to produce it For whom to produce Limited Resources Choices All societies face : 3 basic economic questions

The basic questions What to produce??? How to produce??? For whom to produce???

Factors of Production Resources necessary to produce goods and services 4 Major Factors of Production –Land –Labor –Capital –Entrepeneurship

Natural Resources Land Oil Rainfall Forests Mineral Deposits 2 types of natural resources –Renewable – a resource which increases in quantity over time (oxygen, timber, fresh water, solar energy) –Nonrenewable – can’t be reused, re-grown, or remade (coal, oil, natural gas)

Labor Labor force or human resources Can be both physical and mental Varies in size over time Affected by population growth, immigration, education, war, diease

Capital Capital Goods – satisfy wanted indirectly by aiding in production. Tools, machinery, and buildings used to make products

Consumer goods Goods which directly satisfy a want or wants Ex: clothes, shoes, foods, clocks, bicycles, radios, etc…

Entrepreneurship Individuals who start new businesses, introduce new products, and improve management techniques Innovative, Risk-takers Motive = profit

Decision Making Model 1) Define the Problem 2) List Alternatives 3) State the Criteria 4) Evaluate the Alternatives 5) Make a decision