SCARCITY AND THE SCIENCE OF ECONOMICS

Economics The study of how individuals and countries make choices about ways to use their scarce resources to fulfill or satisfy their wants. Comes from Greek word oikonomia which means “one who manages a household.”

Economics (Continued) Economics studies how people make decisions: some examples, how much they work, what they buy, how much they save, how they invest. how people interact with one another: how buyers and sellers determine the price and quantity of a good that is sold. analyzes forces and trends that affect the economy as a whole: the growth of average income, the fraction of the population that is unemployed, and the rate at which prices rise.

Economics is all about making choices. Countries and people use their resources in different ways. A country might like to spend money on improving the lives of its people or on building up its defenses. A person might like to spend money eating out or buying a new DVD player. Due to scarce resources

If they choose to spend money on one thing, they have less to spend on something else. People and governments cannot do all the things they want. They must make choices. Due to scarce resources

This is where the choice of economics takes place. Economy All the activities in a country affect the production, distribution, and use of goods and services. This is where the choice of economics takes place.

Resource Due to scarce resources The need to make choices arises from the fact that everything that exists is limited. We have to make choices because our wants and needs are greater than our resources.

Scarcity is the main concern of economics. The fundamental economic problem that faces all societies--people do not have enough income or resources to satisfy their every desire. Scarcity is the main concern of economics.

What are some examples of scarcity in our lives? ____?_____ ____?_____ Scarcity (Continued) What are some examples of scarcity in our lives? ____?_____ ____?_____

Needs vs wants Needs: A basic requirement for survival; something that is necessary to remain alive. Examples? a.? b.? c. ?

Basic Needs (Governments) National defense? Good Education? Good Health care? ?

Something that is not needed to survive but that makes life better. Wants Something that is not needed to survive but that makes life better.

THREE BASIC QUESTIONS OF EVERY ECONOMIC SYSTEM What to Produce?— How to Produce?— For Whom to Produce?— What to Produce?--should a society direct most of its resources to the production of military equipment or to other items such as food and housing? How to Produce?—should factory owners use mass production methods that require a lot of equipment and fewer workers, or should they use less equipment and more workers? For Whom to Produce?—who should get the products that are produced? Should only those people who have enough money to buy the goods and services get them? Should the government decide who gets them?

The way a society answers these 3 questions determines its economy. Market economy? b. command economy? c. traditional economy? d. mixed economy?

4 Factors of Production Resources that are used to produce goods and services.

4 FACTORS OF PRODUCTION Historically, factors such as population growth, immigration, famine, war, and disease have impacted the quantity and quality of labor.

Economic Products There are two types of economic products that are useful, relatively scarce, and transferable to others: Goods—the things people buy. Services—the things done for others for a specific fee.

? Types of goods Consumer Goods--use by individuals. Capital Goods--an oven in a bakery. Durable Goods--any goods that lasts three+ years Nondurable Goods--any goods that lasts for less than three years. ? Consumer Goods— a good that is intended for final use by individuals. Capital Goods—manufactured goods that are used to produce additional goods and services, for example an oven in a bakery. The oven is a good that is used to make the bread or cake. Goods—any goods that lasts three years or more when used on a regular basis. (Examples: car, television, washing machine, etc…) Nondurable Goods—any goods that lasts for less than three years when used on a regular basis. (Examples: clothing, food, paper, etc…)

Gross Domestic Product the monetary value of all the finished goods and services produced within a country's borders in a specific time period Formula: C + I + G + (X-M) C=consumer spending I=total investment G=government spending (X-M)=net export GDP is used to measure economic output. GDP is closely evaluated by the Federal Reserve to determine whether the economy is growing too slowly, or too quickly. Recessions are often defined as two consecutive quarters of contraction in GDP This week: 17,840 billions Last year: 17,294 billions

Top 10 Largest economies in the world –in Trillions of $ As of Jan http://www.richestlifestyle.com/largest-economies-in-the-world/

*Yes. Learn Chinese!

Class activity—Understanding the factors of production I. Move into your group (4 students) 1. Identify the item 2. List the major resources needed to make your group’s item—be specific. II. 3. Categorize your list under: Land, Labor, Capital, Entrepreneurs 4. Identify what type of good or service the item is and how it’s being utilized. (i.e. capital good/consumer good; durable or nondurable?) Select a presenter to share and answer questions.