What Is Economics? CHAPTER 1 SECTION 1: An Economic Way of Thinking Holt Economics 4/16/2017 CHAPTER 1 What Is Economics? SECTION 1: An Economic Way of Thinking SECTION 2: Scarcity and Choice SECTION 3: Opportunity Costs SECTION 4: Exchange Chapter 1

Objectives: SECTION 1 An Economic Way of Thinking What is economics? What are the factors of production? What is the goal of entrepreneurship?

Economics SECTION 1 An Economic Way of Thinking Economics is the study of the choices that people make to satisfy their wants and needs.

Factors of Production: SECTION 1 An Economic Way of Thinking Factors of Production: natural resources human resources capital resources entrepreneurship

The goal of entrepreneurship SECTION 1 An Economic Way of Thinking The goal of entrepreneurship The goal of entrepreneurship is to create a good or service of value by developing a new combination of the other factors of production.

Objectives: Scarcity and Choice SECTION 2 Why is scarcity a basic problem of economics? What issues must producers address to distribute resources? Why do producers study productivity?

Scarcity forces people to decide how to use resources effectively. SECTION 2 Scarcity and Choice Scarcity forces people to decide how to use resources effectively.

Questions producers must address to distribute resources: SECTION 2 Scarcity and Choice Questions producers must address to distribute resources: what to produce how to produce for whom to produce

SECTION 2 Scarcity and Choice Producers study productivity to determine if resources are being used wisely.

Objectives: Opportunity Costs SECTION 3 Why is sacrifice an important element of economic choice? What assumptions are involved in creating a production possibilities curve? Why might future production possibilities differ from current production possibilities?

Reasons sacrifice is an important element of economic choice: SECTION 3 Opportunity Costs Reasons sacrifice is an important element of economic choice: forces people to make trade-offs results in opportunity costs

Assumptions involved in creating a production possibilities curve: SECTION 3 Opportunity Costs Assumptions involved in creating a production possibilities curve: that the amount of available resources and technology will not change during the time being studied that all the resources being used are utilized as efficiently as possible

SECTION 3 Opportunity Costs Reasons future production possibilities might differ from current production possibilities: changes in technology changes in the factors of production

Objectives: Exchange SECTION 4 What are the difficulties associated with barter? Why is true self-sufficiency rare? What are the economic benefits of interdependence?

Difficulties associated with bartering: SECTION 4 Exchange Difficulties associated with bartering: relies on bargaining results in complicated transactions

Why true self-sufficiency is rare: SECTION 4 Exchange Why true self-sufficiency is rare: requires a large supply of tools, equipment, and raw materials demands extensive skills and knowledge in a variety of fields

The economic benefits of interdependence: SECTION 4 Exchange The economic benefits of interdependence: does not require countries to produce all goods they consume allows countries to specialize in the production of certain goods while trading others

CHAPTER 1 Wrap-Up 1. What is the difference between microeconomics and macroeconomics? 2. Why is scarcity important in economics? 3. What three production issues must an economic system address? 4. How can division of labor and specialization increase productivity? 5. Identify the assumptions on which the production possibilities curve is based. 6. Describe the benefits of interdependence.