What is Economics?

Economics Study of how people seek to satisfy their needs and wants by making choices.

Dissecting the Definition Needs: something like air, food, shelter that is necessary for survival Wants: an item that we desire but that is not essential to survival

Microeconomics Individual decision making is micro (small) Study of economic behavior & decision making of small units, such as individuals, families, & businesses Individual decision making is micro (small)

Macroeconomics Examines major trends for the economy as a whole Study of economic behavior & decision making of entire economies Examines major trends for the economy as a whole Societal decision making is macro (large)

Three Basic Questions??? In economics there are 3 basic questions that every country must answer… What to produce? How to produce? For whom should we produce?

Economic Systems A set of rules by which a nation answers the basic questions of what, how, and for whom.

Types of Economic Systems Traditional Command Market Mixed

Traditional Decisions are based mostly on customs Difficult to change Mostly in underdeveloped countries/3rd world countries Example: Chad

Traditional Advantages versus Disadvantages Low unemployment rate Little or no money is used Disadvantages Not much economic growth Little scientific development No choices Low standard of living

Command Government ownership & control of production Government makes ALL decisions 2 main types Socialism & Communism Example: North Korea

Command Advantages versus Disadvantages Focuses on Equality Capable of rapid change Economies are very stable Disadvantages Very little individual freedom No reason for hard work

Market Means of production are owned & controlled by private individuals or groups Government plays a small role Market determines how resources are used Cannot be found today

Market Advantages versus Disadvantages Can adjust easily to change Competition No government interference Unlimited opportunities to make money Disadvantages Society does not always get basic needs Higher risk for failure Monopolies are present

Mixed Government plays limited but some role in decision making Focuses on Free Enterprise System Usually 70% individual control & 30% government control Sometimes other way around but very rare Example: United States

Additional Info/Vocabulary Terms Allocate to divide among or distribute in shares

Additional Info/Vocabulary Terms Resources the means to accomplish something

Additional Info/Vocabulary Terms Division of Labor Separate the process of production into specific tasks

Additional Info/Vocabulary Terms Specialization Concentrate labor on single tasks