What is Econ and how does it effect Americans? Economics What is Econ and how does it effect Americans?

Economics- the study of how people make choices about ways to use limited resources to fulfill their wants. Microeconomics- deals with behavior and decision making by small units such as individuals and firms. Macroeconomics- deals with the economy as a whole and decision making by large unites such as governments.

Needs vs. Wants Needs- Food, clothing & shelter Economists consider everything else a want.

SCARCITY: The basic problem of Economics Scarcity exists because people’s incomes and time are limited. This means that people do not and cannot have enough time to satisfy their every want Scarce resources require choices about uses of the factors of production: land, labor & capital

The factors of production Land- natural resources, land and water (Gold, Silver, trees, fish) Labor- human effort directed toward producing goods and services Goods- items people buy Services- activities done for others Capital-the manufactured goods used to make other goods and produce other services. (machines, buildings & tools used to make cars)

Entrepreneurship 30% of all new businesses fail in the 1st 2 years 49% fail after 5 years

Trade-Offs Sacrificing one good or service to purchase or produce another. Examples- Deciding to go to college instead of work full time. You are giving up the opportunity to start making money right away. (opportunity costs) You are giving up 4 years of time to study. Buying a car You are giving up new clothes, eating out, and a vacation

Opportunity costs: It is the next best option that you gave up Example: You have saved $500 and you are thinking about buying the following: Mountain bike Laptop Shotgun Camera

Production Possibilities Curve Shows maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time. Reveals trade offs and opportunity costs.

Practice: P. 29 #’s 20-23