by Missy Chrissy Ben and Harrison Chapter One by Missy Chrissy Ben and Harrison

What is Economics? Economics is the study of how individuals, firms, and nations can best allocate their limited resources in order to get what they need and want.

What are Wants and Needs? Wants are all goods and services one would obtain if one wasn’t constrained by limited resources. Needs are all goods and services necessary to human existence.

What are resources? Resources are all of the things which humans can put to productive use. Almost all resources are in short supply. Examples include: labor, time, information, and machines. Natural Resources are all of the raw materials that occur in nature and are used to produce the things that humans need and want. Examples include: water, land, oil, and timber.

What Happens when Resources are Scarce? Scarcity is a situation of having inadequate resources to obtain wants and needs. Scarcity results in people having to trade off. Trade Offs are the acts of giving up one thing of value to gain another thing of value. Opportunity Cost is the value of the item that is lost when one makes a trade off.

Three Fundamental Economic Questions: What will be produced? How will it be produced? For whom will it be produced?

What is a Market Economy? A market economy is market in which buyers and sellers come together to answer the three economic questions. The United States is an example of a market economy. They answer the three economic questions by observing supply and demand. Supply is when sellers determine how much of a particular good or service they are willing to produce at different price levels. Demand is when buyers determine how much of a good they are willing to buy. Producers are the people that make the goods and they determine what price to sell them at. They must continue to make a profit in order to produce goods.

What are supply/demand curve? A supply curve tells us how much of the product that sellers are willing to part with at various price levels. A demand curve tells us how much of the product buyers are willing to purchase at various price levels. Equilibrium Price is the price at which all the product will be sold at and all orders satisfied.

What do they look like on a graph? equilibrium price

What are Surplus and Shortage? A surplus is a situation in which the quantity supplied is higher than the quantity demanded. (price above equilibrium) A shortage is a situation where the quantity supplied is less than the quantity demanded. (price below equilibrium)

What is a Budget? A budget is a list of wants and needs associated with amount of money for each.

Substitute Goods Substitute Goods are goods and services that serve the same purpose and are interchangeable.

What is microeconomics? Microeconomics is the study of economic decisions, making individuals economic actors (individuals, house, firms). Household is one unit that occupies a single household where the people have common living expenses. Supply labor to businesses in return for income Firms are groups that work to produce a good/service Government takes in money in form of taxes. Provides public services

Land, Labor, and Capital Land is all of the natural resources that are used to produce goods and services Labor is any effort a person devotes to a task for which that person is paid Capital is any human-made resource that is used to create other goods and services . There are two types of capital: physical and human. Physical Capital includes buildings and tools. Benefits of this include: extra time, more knowledge, more productivity. Human Capital is the new knowledge and skills a worker gains through education and experience.

Entrepreneurs Entrepreneurs are ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services. They take big risks to develop original ideas.

Final Questions What is economics? What is microeconomics? What are the three questions of economics? Define land, labor, and capital What are the supply and demand curves?