What is Economics?

On a Separate piece of paper… Write any words or phrases you know associated with Economics What do you pay for??

What is Economics? Definition: Economics is the study of how a society uses its resources to satisfy its wants and needs. What does this mean?

Needs or Wants..??!! Car Cell Phone Glasses House Toothbrush Food Clothing Medication

Wants vs. Needs To decide how gets allocated, we need to look at our wants and needs. Needs are our basic needs to survive: food, clothing, and shelter. Wants are everything else and they are unlimited. I want a new car, new iPod, or a new house. I don’t need them to survive.

Consider the Following Three Scenarios: Scenario #1 – The Family A household works together to do the chores. They clean the house, do laundry, they cut wood for the fireplace, go to the store to buy food, cook meals, and watch television. What economic decisions does this family have to make?

Consider the Following Three Scenarios: Scenario #2 – The Business The managers of a large company are deciding to produce a new product for a line of electronics. They are making decisions on the best place to put their advertising dollars, either online or in traditional television commercials. What economic decisions does this company have to make?

Consider the Following Three Scenarios: Scenario #3 – The Government Law makers in Washington D.C. are deciding how to spend federal money. Should they spend their money on education and save the jobs of thousands of teachers and promote an educated workforce, or should they invest in a new military weapon system that could make the country safer? Additionally, how much money should the government spend on creating jobs for distressed workers or on reducing the cost of healthcare and improving its quality? What economic decisions does the government have to make?

Why Don’t We Fund Them All? We would if we could, BUT we can’t. Why Not? Scarcity – all resources are limited and therefore are scarce. Everyone cannot have everything they want. There is not enough stuff to go around. Choices must be made about how limited resources will be used

Economics Economics is the study of how we satisfy our wants and needs with the limited resources we have. What are the resources that we have to use to satisfy our wants and needs?

Factors of Production Land – this refers to all natural resources used to produce goods and services. This includes crops that are grown on a land, minerals that are mined from land and rent that is paid to an owner of land for its use. Goods and services are the things that we buy. A good is a physical thing you can hold and a service is some thing that gets used up right after it is purchased.

Factors of Production continued 2. Labor – this is the effort that an individual person puts into making a good or service. For this effort the person is paid a wage. 3. Capital – this is anything that is used to produce other goods and services. If you make cars you need machines to make the metal that is used in the cars. It is also the truck that drives the cars to the dealer who sells them, and it is the building that the cars are made in. All of these are the resource known as capital.

A Fourth Factor… Entrepreneurship http://www.investopedia.com/terms/e/entrepreneur.asp An entrepreneur is an individual who, rather than working as an employee, runs a small business and assumes all the risks and rewards of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.

Why Do We Study Economics? We study economics for two reasons. The first reason: We want to be good consumers. Since our resources are limited we have to make choices. We can only buy a limited amount of goods and services with our limited income right?

Why Do We Study Economics? The second reason: 2. We also study economics to be good citizens. Economics effects us as a citizen through our voting decisions.

Deja Vu What factors of production do each of our scenarios have to use? Scenario #1 – The Family One of our family members will work for a wage, which is labor. They are cutting wood to use for heat, that’s land. Anything they use to cut the wood is capital.

It all depends on the product! Deja Vu What factors of production do each of our scenarios have to use? Scenario #2 – The Business They may have to take resources, land, labor, or capital from something else they make. What decisions do they have to make to invest in a new product? What do they need to do to fund the development of a new product? How do they decide where to advertise? It all depends on the product!

Deja Vu What factors of production do each of our scenarios have to use? Scenario #3 – The Government The government makes its decisions on spending on a large scale. Where do they get their money to spend? TAXES 2. Is that resource unlimited? 3. How do they decide which programs get the money?

Where do the resources go? ANSWER: The resources go to what ever gives the most benefit to each sector (consumer, business, government).

Where do the resources go? If it is expensive to heat your house in the winter, then spending resources on the production of wood for burning is in your best interest. If you are a business, you want to make a profit, so you advertise to the audience that will buy the most products. The government wants one thing, to stay in power. To do that they must make decisions on spending to have people vote for them in the next election.

Why Does Economics Play an Important Role in Our Lives? We want to have good information as consumers to make sure we spend our limited resources in a good way. As a citizen we want to make sure the government is spending money in a way we agree with. If we don’t agree with them, then we can exercise our right as a citizen and vote for a change.

What is Economics? Pick one item in each of the three columns to complete. Write your answers on a separate sheet of paper. – From Money Instructor 1. Write a news article using four of the economic terms from the lesson. 2. Give two examples from your own experience of how the study of economics benefits you. 3. Write the definitions for all the economic terms in this lesson. 4. Write a letter to the editor explaining why we should study economics. 5. If you owned a business, explain how you would use the factors of production. 6. Can you use one of the factors of production without using any of the others? Explain how this would or would not work. 7. Create a display that shows how the factors of production can be used. 8. If you were President of the United States, what one thing would you spend federal money on and why? 9. Think about the process of making popcorn. Describe how the factors of production are used in this process. How is technology used to help the process?