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.

Once you move out of your parent’s home, you may be “feelin' so alone” and find the creature comforts that Mom and Dad have are scarce.

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. Consider 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].

(a) I only (b) II only (c) III only (d) I and II only Scarcity is correctly described by which of the following statements? I. Scarcity exists if there are more uses for resources than can be satisfied at one time. II. Scarcity exists if decisions must be made about alternative uses for resources. III. Scarcity would not exist in a society in which people wanted to help others instead of themselves. (a) I only (b) II only (c) III only (d) I and II only (e) I, II, and III

Who makes these decisions? Consumers – the people who decide to buy things What is the incentive of the consumer? Get the most of what they value from their expenditures, BUT they are constrained by their budget.

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

Human wants are: a) Always fixed b) Limited c) Unlimited d) Likely to decrease over time

Producers – The people who make the things that satisfy consumers’ needs and wants. What is the main incentive of the producer? Provide consumers with what they value the most while covering their costs of production and making a profit.

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

3)For Whom to Produce? (pop. of market) Three Basic Questions Because our resources are scarce…economist attempt to answer 3 basic questions: 1)What To Produce? (needs) 2)How To Produce It? (resources) 3)For Whom to Produce? (pop. of market) Every decisions involves trade-offs-all alternatives that we give up with the choice that we make

Factors of Production Resources needed to create/make goods and services (production) 1) Land-limited natural resources…landforms, minerals, etc. 2) Capital-the means by which something is produced…money, machinery, etc.

Cont… 3) Labor-human mental & physical skills and abilities 4) Entrepreneurship-risk-takers takers/innovators