Intro to Economics Unit 1 All the Fundamental Things You Need to Know

TINSTAAFL THERE’S NO SUCH THING AS A FREE LUNCH! Everything has a cost Time, money, etc.

Three Fundamental Questions of Economics WHAT to produce HOW to produce FOR WHOM to produce

Three Basic Human Needs Food/Water Clothing Shelter Sorry kitty, X-Box is not a basic human need.

Need vs. Want Need: basic requirement for survival ex) food, clothing, shelter Want: way of expressing a need ex) wanting a Chipotle burrito to satisfy need for nourishment

It’s Safe to Assume This: People have UNLIMITED WANTS

It’s Safe to Assume This: We have limited resources.

Resources: Factors of Production Land Labor Capital Entrepreneurship Technology

Land Natural resources Ex) Trees, water, minerals, land, etc.

Labor The people who work to produce goods and services Labor force

Capital Goods, tools, and machines required for production

Entrepreneurship Economic motivation for someone to try to make a profit from an idea

Technology Knowledge, science, inventions, technology that can inform or improve production

The Biggest Challenge of Economics: Scarcity We do not have enough resources, time, money, etc. to get everything we want. We have to make choices on how to allocate resources.

Allocation How are we going to use our scarce resources? Determine what needs or wants should be addressed Determine what/how many factors of production to use to address these needs or wants

So What Exactly is Economics? The study of how people and nations make choices about how to use scarce resources to fit their needs and wants.

Basic Economic Concepts

Goods Consumer Good: intended for final use by individuals

Goods Capital Goods: manufactured goods used to produce other goods and services

Services Service: work that is performed for someone

Value & Paradox of Value Value: monetary worth ($) Paradox of Value: when some necessities, such as water, have little monetary value, whereas non-necessities, such as diamonds, have higher value

Utility Utility: Capacity to be useful or provide satisfaction Value = scarce + has utility

Wealth Wealth: accumulation of products that are tangible, scarce, useful, and transferable from one person to another