What is Economics Chapter 1

Economics The study of how people satisfy wants with scarce resources. (Noble Prize winning Economist Milton Friedman)

Scarcity The condition where unlimited human wants face limited resources.

Microeconomics The study of the choices made by economic actors such as households, companies and individual markets.

Marcoeconomics Behavior of entire economies. For example, unemployment in the United States is a macroeconomic topic.

Three basic questions in Economics What must we produce-based on consumer needs and wants. How should we produce it-based on resources. For whom should we produce it- specify consumer interests.

How do we make Economic Decisions? Need- Required for survival Want- Desired for satisfaction Goods- Physical, or tangible, objects that can be purchased. Services-Actions such as plumbing, teaching and taxi driving that people purchase.

Factors of Production Necessary resources to produce what people want and need. Land Capital Labor Entrepreneurship

Land Society’s limited natural resources- landforms, minerals, vegetation, animal life and climate.

Capital The means by which something is produced such as money, tools, equipment, machinery and factories.

Labor Workers who apply their efforts, abilities, and skills to production.

Entrepreneurship Risk-takers who combine the land, labor and capital into new products or services.