Economics -Economics -the system that society uses to produce and distribute goods and services -Why study economics??? -Why does the government pay so much attention to the economy???

Wants and Needs -Wants are the things which people would like to have -Needs are the things which people need to survive -Goods -things that can be made or manufactured -Capital goods are the things used to manufacture other goods -consumer goods are goods meant to be sold to consumers for use -Services -work that is done for someone for a certain price

Limited Availability -Goods and Services are produced using resources Natural Resources or Human Resources -Scarcity -the economic problems of limited goods and the unlimited wants of society in general -Scarcity limits the availability of goods and services that people desire or need. -This scarcity gives goods and services VALUE

Economic Choices -Opportunity Cost -this is the benefit that you have given up in order to pursue an alternative -Trade Off -this is the choice that you make when faced with economic decisions where you have to choose one thing over another

Types of Costs Fixed Costs Expenses that are the same no matter how many units of goods are produced Ex: Mortgage payments and property taxes – it makes no difference whether your company produces 1 bike helmet or 300.. Your mortgage & taxes will remain the same -Variable Costs Expenses that change with the number of items produced Ex: Wages & raw materials -Total Costs Add fixed costs & variable costs -Marginal Costs The additional cost of producing one additional unit of output. Example $1500 to produce 30 bikes helmets, but $1550 to produce 31 helmets. What is the marginal cost of the additional unit? = $50

Ex: If 42 units of a product are sold at $2 each: Types of Revenue Total Revenue is the number of units sold multiplied by the average price per unit. Ex: If 42 units of a product are sold at $2 each: 42 units X $2 = $84 (total revenue Marginal Revenue- The change in revenue that results from selling an additional unit Ex: If DVDs sell for $10 and a store sells 100 DVDs a month, the total revenue is $1,000 If the store sells 101 DVDs instead of 100 DVDs for $1,010, the Marginal Revenue is $10 We do something because we expect to achieve some benefit. Marginal Benefit- the additional satisfaction or benefit received when one more unit is produced

Cost-Benefit Analysis The best decision is make by comparing the (marginal) benefits against the (marginal) costs Economists use a type of decision making called Cost-Benefit Analysis- weighing the costs vs. benefits. CHOOSE an action when the benefits are greater than the costs. REJECT the option if the costs outweigh the benefits