What is Economics

Retap or Refresh Prior to defining economics, you need to have a grasp of the difference between a good and a service. Goods-something tangible that satisfy people’s wants and desires Service-something intangible that satisfy people’s wants and desires

Tangible and Intangible Tangible- can be felt/grasp Intangible cannot be touched nor perceived by the senses

Good or Service?

 What are the wants and desires of all individuals?

 We  Want  Everything  Without Limit

 We want food; water; good grades; more money; a home; a haircut; a car/truck; a relationship…………………..  The list is never-ending and ever changing

So what is the definition of economics Economics (Econ) is the study of individuals and societies, faced with limitless wants, chooses to allocate its scarce resources to satisfy those wants. Sounds like fun?

 1 st - we will look at how individuals and societies makes decisions about what they want.  2 nd - we will study how individuals and societies choose to allocate scarce (i.e. limited amounts) resources.

There’s an eternal struggle between unlimited wants and limited resources

COST Whenever unlimited wants go after limited resources, there is always a COST Nothing in this world is free Nothing in this world is free

Costs Cost is not always monetary ($) There are Social Emotional Jealousy Physical Environmental Or any number of costs out there

 In economics, these costs are referred to as……… Opportunity Costs

ECO redefined Simply stated Economics = scarcity

Definition of scarcity Wants > availability of resources

Mathematically Econ is Economics= Scarcity= Wants> Availability of Resources

So what are these resources we want? 4 Basic categories- 4 Basic categories- Land 1. Land: scarce b/c there’s a limited amount available. Included here is air, water and raw materials. Payments are rents, mortgages Labor willingable 2. Labor: human capital. Scarce since only a portion of population is available to work. Also these people need to willing and/or able to perform certain tasks. Payments are salary, wages, tips, commissions

R ESOURCES CONTINUED 3. Capital : (in Econ this not money) goods produce goods for future consumption. A physical item used in the production process. Scarce due to their limited numbers. Payment for these goods is principle + interest. Entrepreneurship 4. Entrepreneurship : a person willing to take risks to start a business. Payment is profits (if good) and Loss (if bad)