Economics introduction

Why should we study Economics? https://www.youtube.com/watch ?v=gTAMRERJgVY

What is economics? http://money.cnn.com/video/ne ws/economy/2014/10/21/we- the-economy-cave-o- nomics.cnnmoney/

Economics Economics: the study of how people try to satisfy seemingly unlimited and competing needs and wants through the careful use of relatively scarce resources Scarcity: the condition that results from society not having enough resources to produce all the things people would like to have https://www.youtube.com/watch?v=DeYxn6MJxGQ

Need: A basic requirement for survival Want: Something we would like to have but is not necessary for survival

Our needs and wants are usually expressed in terms of economic products Economic products are goods that are: Useful Relatively scarce Transferrable to others Economic products fall into two groups: Goods (tangible) Services (intangible)

Goods fall into four categories: GOODS Useful tangible item that can be used to satisfy a need or want Goods are then divided into categories, depending on there use. Some goods can belong to two groups at the same time Goods fall into four categories: GOODS

Durable good: Item that lasts three years or longer Ex: Machinery, car, refrigerator, etc… Nondurable good: Item that lasts less than three years when used on a regular basis Ex: paper, most clothing items, food

Consumer good: Intended for use by individuals Ex: shoes, shirts, cars, etc… Capital Good: Tools, or machinery, or equipment that is used by businesses to produce other products

SERVICES Services: Work that is performed for others Ex: haircuts, home repairs, entertainment, etc. Work that doctors, lawyers, and teachers perform

Value: Worth that can be expressed in dollars and cents For something to have value, it must also have utility Paradox of value: The situation in which some necessities have low monetary value while some non-necessities have a much higher value https://www.youtube.com/watch?v=e7S8jWh6 AEs

Utility: The capacity to be useful and provide satisfaction Wealth: Accumulation of products that are: Tangible Scarce Have utility Transferable

Everything we do has a cost – Even when it seems as if we are getting something “for free” Do you really get a free meal when you use a buy one, get one free” coupon? The more a company gives away “free”, the more it has to raise the prices for other items it sells

Most things in life are not free, because someone has to pay for producing them in the first place Economist use the term TINSTAAFL to describe this concept “There is no such thing as a free lunch”

Three basic questions every society faces: WHAT to produce? Society must choose based on its needs HOW to produce? Society must choose based on its resources FOR WHOM to produce? Society must choose based on its population and other available markets

Economics is also a social science because it deals with the behavior of people as they deal with the issues of needs and wants, versus scarce resources The four key elements are: Description Describes economic activity Gross Domestic Product (GDP) Monetary value of all final goods and services, and structures produced, within a country’s borders in a 12-month period.

GDP is the most comprehensive measure of a country’s wealth https://www.youtube.com/watch?v=iAio7vk6XU 4 Analysis: Economics analyzes the economic activity it describes Why prices go up or down Or how taxes affect savings and how things happen

Explanation: Refers to how economists communicate knowledge of the economy and its activities to others Prediction: Refers to how past economic activities can advise us of potential future economic activity

Section 1.2

What is this the logo for?

McDonalds Why do you know this logo? Why do you think McDonalds is so successful? What does McDonalds need to have to run its restaurants? What would happen to McDonalds if these went away? https://www.youtube.com/watch?v=AX2uz2XYkbo

Famous former employees Rachel McAdams Jeff Bezos (Amazon) Sharon Stone Jay Leno Seal Carl Lewis Pink Star jones Keenan Wayans Shania Twain DL Hughley James Franco Lin-Manuel Miranda

Factors of Production Factors of production – resources required to produce the things we like to have Land – natural resources not created by humans Capital – tools, equipment, machinery, and factories used in production of goods and services

Labor people’s efforts, abilities and skills Entrepreneurs Risk takers in search of profits who do something with existing resources People who start new businesses or bring new products to market

Production possibilities curve Everything we make requires the four factors of production Economists use it to illustrate all possible combinations of goods and services an economy can produce

Production possibilities curve

Opportunity cost Opportunity cost Cost of the next best alternative use of resources when one choice is made rather than another

Opportunity cost

Trade-offs Trade-offs Alternative choices that are given up in favor of the choice we select

Section 1.3

Economic growth When a nation’s total output of goods and services increases over time Important for two reasons: Because of scarcity, everyone wants more than what they currently have As populations grow, more people will want the goods and services Economic growth requires risk and sacrifices

Productivity Measure of the amount of goods and services produced with a given amount of resources in a specific period of time Human capital - Investments in people Individuals can invest in education Employers can invest in training and other programs to improve skills Government can invest by providing financial aid for education and health care costs

Division of labor and specialization can improve productivity Division of work into a number of separate tasks to be performed by different workers Increases efficiency by ensuring that workers become good at specific tasks

Specialization Assignment of tasks to the workers, factories, regions, or nations that that can perform them most efficiently Great example: Ford’s assembly line production Cut the time to assembly a car from 1.5 days to about 2.5 hours Reduced the price of a new car by 50%

Circular Flow of Economic Activity The key feature of the circle flow is the market Markets: Location or other mechanisms that allows buyers and sellers to exchange a specific product Local, regional, national, global, and cyberspace

Factor Markets: Where all of the factors of production are bought and sold Where people earn their incomes Center on the four factors of production Product Markets: Where people spend their income Center on goods and services

Individuals and businesses are connected by markets