INTRODUCTION TO ECONOMICS The Study of the Economy

WANT v. NEED A NEED is something necessary for survival A WANT is something that is not required, but you would like to have it. Examples of NEEDS-water, shelter, food, clothing (in our society MONEY), medical care Examples of WANTS-more money, electronics, jewelry, brand name clothes Why is it important to distinguish between the two?

WANT v. NEED When can something be considered both a want and a need? MONEY-We need money to buy goods, but we want more money. CAR- We may want a car, but we also may need one to get to school/work. COMPUTER-Computers can be wants, but depending on your job/education it may also be a need.

WHAT IS ECONOMICS? Make a list of any choice you have made in the last 24 hours? What caused you to make that choice? (Ex.-I ate pizza at lunch b/c I like it and that is what I had enough money for. How does this choice impact the economy?

HOW DO CHOICES IMPACT THE ECONOMY? CONSUMERS BUSINESSES GOVERNMENT

WHAT IS ECONOMICS? ECONOMICS-the study of how we make choices in a world full of limited resources. MICROeconomics-The study of how individuals and small businesses make decision. MACROeconomics-The study of how the government and society makes decisions.

SCARCITY RESOURCES-the materials used to make products SCARCITY-There are not enough resources to satisfy our wants and needs, because our needs are limitless. SCARCITY will always exist because no matter what we have we will always want and need more.

Questions in dealing with scarce resources: WHAT to produce? HOW to produce it? WHOM to produce it for? Scarce resources force-interdependence (people and governments to rely on each other)

CHOICES Because we have limited resources, we are forced to make choices. TRADE-OFF-Choosing one thing for another. (EX) I have $20, lunch cost $12 and the shirt cost $18…I must make a trade-off. OPPORTUNITY COST-the value of the thing you gave up when making a trade-off. Any time you make a choice, you give something up.

GOODS vs. SERVICES GOOD-something tangible (you can touch it) that fulfills our wants and needs. Ex-Table, Clothes, IPOD, Food SERVICE-something intangible (can’t touch it) that fulfills our wants and needs Ex-Doctor doing surgery, Barber cutting hair, Gardner cutting the grass. Because of scarcity, we must pick and choose how we spend our time and money