Unit 8: Introduction to Economics

The Basics of Economics

I. What is Economics? The study of how we make decisions in a world where resources are limited We have many needs and wants, but we have to make decisions because of scarcity

II. Economic Decision Making Because of scarcity, every government, business, and individual has to answer 3 questions: What to produce? How to produce? For whom to produce?

III. Economic Models To help us make economic decisions, we will use economic models Ex. Charts, graphs

Types of Cost

I. Economic Decision-Making Every decision made has some type of cost or consequence

II. Choices Trade-off: the alternative you face if you decide to do one thing rather than another Ex. You can go to the movies or study for your economics test

Opportunity Cost: the cost of the next best alternative use of time and money when choosing to do one thing rather than another Go to the movies—do poorly on your test, fail the EOC Study for the test—miss the fun with your friends

III. Other Types of Cost Fixed costs: Expenses that are the same no matter how much or how little you produce Ex. Mortgage payments, property taxes Variable costs: Expenses that change when the # of items produced changes Ex. Salaries, materials, light bills

Total Costs: fixed costs and variable costs added together Fixed + Variable = Total

Class Starter Who is responsible for paying the cost of incarcerating criminals? Which set of laws simplified Roman Laws? List some examples of civic duties. Which amendment contains the Equal Protection Clause?

Factors of Production

I. Producing Goods and Services We produce goods and services for people to buy Goods: tangible products that we use to satisfy our wants and needs Services: work performed by a person for someone else Gross Domestic Product (GDP): the total $ value of all final goods and services produced in a country during a single year

II. Factors of Production Resources necessary to produce goods and services Land, labor, capital, entrepreneurship

Land (natural resources): things we find in nature that make production possible Ex. Trees, animals, water, air Labor: human effort directed toward producing goods and services Ex. Doctors, lawyers, teachers, plumbers, cashiers

Capital: previously manufactured goods used to make other goods and services Ex. Sewing machines, projectors, pens, hammers, $ Entrepreneurship: the ability to start a new business Entrepreneur—someone who starts a business; person has to be innovative and willing to take risks to make the profit