The Basics of Economics Goal CE.E.1.1 – Compare how individuals and governments utilize scarce resources.

Economics is the study of how people / governments / businesses make decisions about how to use limited resources to meet unlimited wants and needs Needs – things that are required for survival: food & water, shelter, clothing Wants – things we would like to have: cars, entertainment, cell phone, etc. Scarcity – means not having enough of something (resources)– this is why we have to make decisions about what you can afford, what you need, and what you want ** scarcity is the biggest problem in economics

The Impact of Choices Trade off – the alternative you face if you decide to do one thing over another… giving up one thing to do another **we make these decisions everyday Opportunity cost – is the cost of what you give up when you choose to do one thing over another…what you have “cost” yourself the opportunity to do For example, going to college is going to cost $ and time that you could be spending else- where; or playing video games for 4 hours may “cost” you a better grade on your C&E test

Goods and Services Good – a tangible thing that satisfies human wants and needs (tangible means something that can be touched) 2 types: durable and non-durable examples – pencils, oranges, chairs, clothing Service - an intangible thing that satisfies human wants and needs; it is an act; something that someone does for you examples – a concert, a bus ride, tutoring, a haircut ** the U.S. is a “service economy” today

Resources – anything used to produce goods/services to (aka factors of production) satisfy wants and needs 4 Factors of Production: 1. natural resources – anything in a natural state; hasn’t been (aka land) changed by man 2. labor – work or effort done by man (aka human resources) 3. capital – processed materials ( for example: tools, buildings, appliances, the $ used to buy them) 4. entrepreneurship – organizing the other resources to produce a good/service; involves mental abilities, such as intelligence, creativity, etc.  Circular flow model of economic activity

Considerations Economic Models – simplified representations of the real world – are used to explain how the economy works, to predict what would happen if something changed, or to help make decisions ** are really ideas or theories, only based on assumptions so they might be wrong. Rational choice – picking the option with the most benefit or the least negative consequence * positive statement: a fact; something that can be proven * normative statement: an opinion; something that is a value judgment

What type of graph is this?

Representations with Graphs pie graph – the circle represents the whole of something; (aka circle graph) is equal to 100 % * always label these parts: 1. title of graph 2. pieces / sections (or have a key) 3. percentages bar graph – individual bars represent categories / items; is equal to 100 % * there are some exceptions * always label these parts: 1. title of graph 2. both axes 3. value or % of each item 4. categories / items (or have a key) line graph – shows a relationship between 2 variables * always label these parts: 1. title of graph 2. both axes (add a “0” at the intersection of the 2 axes) 3. points (if necessary) 4. connect points

Production Possibilities Frontier (PPF) – a graph that shows the possible combinations of 2 products which can be produced with the available resources; can show options for a decision and the opportunity cost associated with each