Economics and Scarcity

Is Economics Important? Most people in the United States think that it is. 96% of Americans believe economics should be taught in high school (at least basic economics) Half of the adults who believe this cannot pass an elementary quiz on basic economics Two out of three high school students cannot pass this same quiz.

Scarcity We have unlimited wants with limited resources. Must make choices What to produce? How to produce? For Whom to Produce? Economics is the study of how people try to satisfy the unlimited and competing wants of people with scarce resources

Need v. Want What is this? Free stuff There is no such thing as a free lunch! Governments must decide what to produce because TINSTAAFL. -military? -low income housing? -Social Security How to produce? -More workers and fewer machines? -Where will they produce? For whom to produce? -Based on demand and maximum profits

How does our Federal Government Spend Money?

How does our Federal Government Spend Money? Healthcare 27.49% National Defense 23.91% Job and Family Security 18.17% Net Interest 9.07% Veteran Benefits 5.93% Education and Job Training 3.59% Immigration, Law Enforcement, and Administration of Justice 2% International Affairs 1.85% Natural Resources, Energy, and Environment 1.64% Science, Space, and Technology Programs 1.13% Agriculture 0.97% Community, Area, and Regional Development 0.43% Response to Natural Disasters 0.39% Additional Government Programs 3.42%

Factors of Production Factors of Production – resources required to produce the things we would like to have are land, capital, labor, and entrepreneurs Land – space and natural resources -Explains disparities between countries Capital – Tools, equipment, machinery, and factories used in producing goods and services (also called capital goods) Financial Capital – the money used to buy the tools and equipment for production Labor – people, their abilities and skills Entrepreneurs – Innovators that change the economy Production – the bringing together of capital, labor, land, and entrepreneurs to get a good or service

GDP GDP – Gross Domestic Product – The monetary value of all good and services produced within a country’s borders in a year. -This serves as a measure of a country’s wealth and state of the economy Economics also deals with who gets what, how much people get, unemployment, inflation, international trade, interaction of business and labor, and effects of government spending and taxes Economists must make predictions. How does this happen in our markets? Government?