ECONOMICS

Economics is the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided. The key word in this definition is choose. Economics is a behavioral, or social, science. In large measure it is the study of how people make choices. The choices that people make, when added up, translate into societal choices.

MICROECONOMICS An economic behavior in which economist study is microeconomics Individuals Families Businesses Micro meaning small Elements in the economy studied Prices Costs profits

MACROECONOMICS Another economic behavior studied by economist is macroeconomics As a whole Inflation Unemployment Aggregate demand Aggregate supply Macro meaning large (big picture)

APPLICATION Which does each of the news headlines relate to-microeconomics or macroeconomics 1)National Unemployment Figures Rise 2)World Trade Organization Meets 3)Shipbuilder Wins Navy Contract 4)Cab Driver on Strike! 5)Gasoline Prices Jump 25 Cents

3 BASIC QUESTIONS What gets produced? Resources How is it produces? Producers Who gets what is produced? Household

BASIC ECONOMICS Wants are desires that can be satisfied by consuming a good or service Ever changing unlimited Needs are things that are necessary for survival Food Clothing Shelter

SCARCITY A situation when there are not enough resources to meet the human needs Resource - a source of supply, support, or aid, especially one that can be readily drawn upon when needed Affects Goods – physical things that can be purchased Services – work that one person does for another Consumer – buyer Producer – maker of good or service

How does scarcity affect consumers? How does scarcity affect producers? How does scarcity affect governments?

THREE ECONOMIC QUESTIONS What will be produced? Resource available i.e. gold, oil, iron, coal, silver How will it be produced? Goods and services For whom will it be produced? How much should people get? How should their share be delivered? Railroads, highways, airports, trucks

FACTORS OF PRODUCTION Economic resources needed to produce goods and services Land Labor Capital Tools, machinery, factories Entrepreneurship Risk to create new busines s

What is the difference between land and capital? Which of the factors of production is most important? FYI, two of every ten companies will be failures, six will be marginally successful, and the remaining two will be very successful

CAUSE AND EFFECTS Causes are the events that explain why something happens Effects are what happens

ECONOMIC CONCEPTS Economic System: a collection of laws, institutions and activities, that provide a framework for economic decision-making Command Economy: economic decision-making is made largely by a government authority Market Economy: economic decision-making is made by individuals in the marketplace that reflects supply and demand Scarcity: limited quantities of resources that are never enough to satisfy human wants

ECONOMIC CHOICES TODAY Why do we make choices? Incentives – receive gratitude Grades in school Wages paid Praise or recognition Early retirement Utility – satisfaction from using a product or service

FACTORS IN MAKING CHOICES Motivation Cost is a key motivation Benefit is a motivator Self-interest Trade-off is an economic choice. The alternative that a consumer gives up. Opportunity cost is the value of something that is given up to get something else that is wanted

IS THE TASSEL WORTH THE HASSLE ACTIVITY? From 1970 to 1991, the percentage of the population in the United States who completed four years or more of college doubled, increasing from 10.7% to 21.4%. In 1990, in the United States, the average earnings of a male who had completed 5 or more years of college was $55, (female, $35,827.00); the average earnings of a male who had completed only 1 to 3 years of high school was $22, (female, $15,381.00). Since 1970, the percentage of the population in the United States (aged 25 years and older, who completed 4 or more years of college) has doubled, and the percentage of the population completing only 8 years of elementary school has been reduced by 2/3rds.

AN ECONOMIC MYSTERY "When it takes, at least, an additional seven years of schooling, and over one hundred thousand dollars in costs and lost earnings, why would a person want to graduate from college instead of dropping out after the ninth grade?“ Write a short essay explaining your response using information learned in this section. Submit it into turnitin.com. Write in complete detail sentences.