 Economics is the study of why people make one choice rather than another when buying and selling, spending and saving

 What are goods and services?  What are economic resources?  Why must we make economic choices?  What is the cost of every choice?

 Goods are things that can be seen or touched  Like ipods, shoes, bicycles  Services are useful work that cannot be seen or touched  The person who sells you the ipod is performing a service  Doctors, lawyers, hair stylists

 Goods and services must be made or produced  Businesses offer goods and services for sale  Business owners, managers, workers who make ipods or cut your hair are Producers  They are producing services and products  The users of the goods and services are consumers

 Things that go into the making of goods and services

 Natural Resources  Human Resources  Capital Resources

 Things provided by the world around us  Water  Minerals like iron and gold  Coal  Gas  Natural resources appear plentiful, but there is a limited supply

 The people who put things together to make goods and services  The producers  How much a nation produces depends on the abilities of the people

 Machines, tools, buildings used in the production of goods and services are the capital resources  A nation’s wealth is measured in terms of the capital it possesses

 Scarcity  Scarcity means that there is not enough of everything to go around  Consumers want more goods and services than we can produce  ALL types of resources are LIMITED  Therefore, we must decide how best to use those resources

 The way a group or nation organizes itself for production  Three general types of systems

 What goods and services shall be produced?  How shall the goods and services be produced?  Who will receive the goods and services that are produced?

 One in which people’s economic roles are the same as those of their parents and grandparents  Tradition decides what these people do for a living

 One in which a nation’s economic decisions are the result of individual decisions by buyers and sellers  You choose what you want to do i.e. open a business, go to college  The prices you charge are influenced by the prices charged by you competitors

 The main decision maker in this type of system is the government  No person independently decides to open or run any kind of business  The government decides what you do, what products and services are produced

 Which type of market does the US have?  Market Economy

 An economy’s means of production are its capital: factories, farms, shops, machinery

 Public Ownership of Means of Production  Government owns and operates means of production  Soviet Union, China

 When government owns and operates railways, banks, airlines, and power plants, but allows individuals to own other businesses  Decisions by consumers, businesses and government determine economic activity  Sweden

 Where most stores, farms, and factories are owned and operated by individuals and businesses  Free enterprise  United States

 No country has an economic system that is 100% communism, socialism, or capitalism  All countries have a mixed economy with some free enterprise and some government ownership