What is Economics?

Defining Economics Wants Needs What fundamental qualities make up Economics? Versus Wants Needs

Then what is the definition? Economics is the study of how scarce productive resources are used to satisfy human’s unlimited needs & wants.

The Condition of Scarcity Our resources are limited…but our desires for goods and services are NOT. Something is scarce if it has more than one valuable use. Example: your time. When resources are used to do one thing, they are unavailable to do others.

To Choose Is To Sacrifice Scarcity forces us to make choices. Choosing an action means we sacrifice doing something else. The opportunity cost of a choice is the value of what is given up [THE NEXT BEST ALTERNATIVE].

Who makes these decisions? Consumers – the people who decide to buy things What is the motivation of the consumer? Get the most for your money.

What’s the Difference between a Need and a Want? NEEDS WANTS Those goods and services that are necessary for survival Food, clothing, shelter Those goods and services that people consume beyond what is necessary for survival

Producers – The people who make the things that satisfy consumers’ needs and wants. What is the main motivation of the producer? Provide consumers (you, people with money) with what they value the most while covering their costs of production and making a profit. Profit: the money made after you pay your bills. http://www.google.com/imgres?imgurl=https://farm3.staticflickr.com/2787/4315218578_f111fc2e14_o.jpg&imgrefurl=https://www.flickr.com/photos/httpoldmaisonblogspotcom/4315218578/&h=731&w=520&tbnid=kNorINouJjpG7M:&zoom=1&docid=l7JbXqHcC4lnuM&ei=RUwdVdTMKMHvggSNkoSQBw&tbm=isch&ved=0CBwQMygAMAA

What are goods and services? Physical objects that can be purchased Pizza, bicycle, shoes Actions or activities that are performed for a fee. Lawyers, teachers, plumbers

Gross Domestic Product GDP The dollar value of all final goods, services, and structures produced within a country’s borders in a 12-month period. GDP is used to determine a country’s wealth.

Questions that Economics answers: 1. What do we produce with limited resources? 2. How do we produce the goods? 3. For whom are the goods produced?

Factors of Production Resources required to produce the things we would like to have. Combine to make goods and services.

Factors of Production 1. Land 2. Labor 3. Capital 4. Entrepreneur

Factors of Production 1. Land: These are the “gifts from nature” or natural resources. https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcQGo-zFIEzOeglNR9MamsfKvzIBeUx4ajn7R9aS36qesg5dH7PZYg

Factors of Production 2. Labor: People with all their efforts, abilities, and skills. What people do to make money. http://pixabay.com/static/uploads/photo/2014/07/12/01/42/vintage-391028_640.jpg

Factors of Production Capital: The tools, equipment, machinery, and factories used in the production of goods and services. What a business can resell to make money.

Factors of Production Entrepreneur: Risk takers in search of profits who start a new business or bring new products into the market. Example: Shark Tank https://c2.staticflickr.com/2/1242/877913815_352df2cf79.jpg