What is Economics?

What is Economics? “Economics is the study of how individuals Write This Down What is Economics? “Economics is the study of how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.”

What does this definition mean? What is Economics? “Economics is the study of how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.” What does this definition mean?

“Economics is the study of how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.” Economics studies both the individuals and society Micro - focuses on individuals or small segments of society

“Economics is the study of how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.” Economics studies both the individuals and society Macro - focuses on the economy as a whole or large groups/subdivisions like Gov’ts

What is Economics? “Economics is the study of how individuals Write This Down What is Economics? “Economics is the study of how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.” Micro – deals with behavior/decisions of small units like individuals or firms Macro – deals with economy as a whole & behavior of large units like gov’t & unions

What are they exactly? Scarcity = limited, desirable, price, relative “Economics is the study of how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.” Economics studies the choices we make to allocate scarce resources (Requirements) Scarcity = limited, desirable, price, relative Resources = Factors of Production What are they exactly?

There are four categories of resources 1. Land

There are four categories of resources 1. Land Included in LAND are air, water, & raw materials like timber, copper, etc. We could increase it by going to other planets, but Lets assume this world is the only source of land we have.

Land is scarce because there is only a limited amount of it available There are four categories of resources 1. Land Land is scarce because there is only a limited amount of it available We could increase it by going to other planets, but Lets assume this world is the only source of land we have.

Because we want everything…. and resources are limited…. There are four categories of resources 1. Land Because we want everything…. and resources are limited….

It is almost as if there is a fight that occurs between our unlimited wants and the limited resources that are available. This cost is not always a monetary cost. COST It can be a social cost, emotional cost, Jealousy cost, there are any number of costs The limited resources. Our unlimited wants. Whenever our unlimited wants are going after the limited Resources available, there is always a cost. Nothing on Earth is free.

The payment for land is in the form of either mortgage or rent There are four categories of resources 1. Land The payment for land is in the form of either mortgage or rent

What is Economics? “Economics is the study of how individuals Write This Down What is Economics? “Economics is the study of how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.” Micro – deals with behavior/decisions of small units like individuals or firms Macro – deals with economy as a whole & behavior of large units like gov’t & unions

The 4 categories of resources (Factors of Production) Micro – deals with behavior/decisions of small units like individuals or firms Macro – deals with economy as a whole & behavior of large units like gov’t & unions The 4 categories of resources (Factors of Production) Payment 1. Land Mortgage or rent 2. Labor

many willing and/or able to do a job LABOR Labor is scarce because there only so many people on the planet AND only so many willing and/or able to do a job

Salary, wages, tips, commission, etc. LABOR The payment for labor = Salary, wages, tips, commission, etc.

The 4 categories of resources (Factors of Production) Micro – deals with behavior/decisions of small units like individuals or firms Macro – deals with economy as a whole & behavior of large units like gov’t & unions The 4 categories of resources (Factors of Production) Payment 1. Land Mortgage or rent 2. Labor Wages, salary, tips, etc. 3. Capital

Capital with an A are things used to make products Not this Capitol, but Capital Capital with an A are things used to make products “stuff you use to make other stuff”

In economics, money is NOT considered to be capital. Not this capital either!!

Capital goods PRODUCE goods for future consumption Not this capital either!!

Not this capital either!! Money doesn’t produce anything, it’s just there Story of Heart of Darkness to illustrate money only has value because we have decided to give it value. It doesn’t have value in and of itself. Not this capital either!!

Capital Factory Equipment Machinery To be capital, it must be a physical item used in the production process such as:

Capital Factory Equipment Machinery Capital is scarce because there are a limited number of machines, equipment, and factories.

The payment for capital is: Factory Equipment Machinery The payment for capital is: PRINCIPAL + INTEREST

The 4 categories of resources (Factors of Production) Micro – deals with behavior/decisions of small units like individuals or firms Macro – deals with economy as a whole & behavior of large units like gov’t & unions The 4 categories of resources (Factors of Production) Payment 1. Land Mortgage or rent 2. Labor Wages, salary, tips, etc. 3. Capital Principle + Interest 4. Entrepreneurship

An individual who is willing to take a risk to start a business. Entrepreneurship An individual who is willing to take a risk to start a business.

Entrepreneurship Entrepreneurs are scarce because there is a limited amount of individuals who want to start his or her own business.

The payment for the risk of starting a business is in the form of: Entrepreneurship The payment for the risk of starting a business is in the form of: Profit – if you are good

The payment for the risk of starting a business is in the form of: Entrepreneurship The payment for the risk of starting a business is in the form of: Loss – if not so good.

The 4 categories of resources (Factors of Production) Micro – deals with behavior/decisions of small units like individuals or firms Macro – deals with economy as a whole & behavior of large units like gov’t & unions The 4 categories of resources (Factors of Production) Payment 1. Land Mortgage or rent 2. Labor Wages, salary, tips, etc. 3. Capital Principle + Interest 4. Entrepreneurship Profits/Losses

Capital Entrepreneurship Land Labor Memory Trick 3. Capital Principle + Interest 4. Entrepreneurship Profits/Losses Memory Trick Capital Entrepreneurship Land Labor Cells are the building blocks of life, FOP’s are the building block of economics.

Time could also be considered a FOP… Factors of Production Additional Info Time could also be considered a FOP… But most consider it included in the other factors

Scarcity = wants > availability resources What is Economics? Economists like to explain everything in equation form Economics = Scarcity Scarcity = wants > availability resources So then the mathematical formula for defining economics is: Economics = Scarcity = wants > availability resources

Economics = Scarcity = wants > resources 4. Entrepreneurship Profits/Losses Memory Trick Capital Entrepreneurship Land Labor Cells are the building blocks of life, FOP’s are the building block of economics. So, Economics is… Economics = Scarcity = wants > resources unlimited limited

On the back of this paper, copy & color the chart (fig 1 On the back of this paper, copy & color the chart (fig 1.1) from page 6 of the textbook