Chapter 1 - Preview  From the book, “Trade-Offs: Resources are scarce. Time is scarce. Sometimes it seems as if you have a million things to do, and you just don’t know what to do first. You may have many alternatives to select from, and you have to make choices – but which choice is the right one? One choice may prevent another. Believe it or not, the study of economics will help you become a better decision maker because it helps you develop a ‘way of thinking’ about trade-offs and decision making.”

Chapter 1 What is Economics? ***Brainstorm in your group what your definition economics is and write it on the sheet in the back*** ***What do you think TINSTAAFL stands for*** ***As a group, read TINSTAAFL on pg. 8 of your textbook and discuss examples you may have seen on why the concept is true.****

What is Economics? Economics is the study of the ways in which societies use the limited resources available to them to satisfy the unlimited wants of their citizens. ***Look at the picture of the shoes in your book. Then, look at the shoes your peers are wearing. Is anyone wearing the exact same pair of shoes? What do you notice about the picture? What do you notice about your peers’ shoes? What determines the price of shoes?*** ***Who wants a Snickers bar?***

What is Economics? Economic decisions do not happen in a vacuum. Certain subjects or experiences you’ve had to this day affect economic decisions. Virtually everything affects the economy. ***Brainstorm with your group about 5 variables that can affect our local economy of Baldwin.***

Section 1 – Scarcity and the Science of Economics Key terms to remember to understand economics!!!  scarcity  factors of production  land  capital  financial capital  labor  entrepreneur  economics

Section 1 – Scarcity and the Science of Economics Scarcity – It exists when there are limited resources available to satisfy unlimited wants and needs. In business: Resources are items used in production – land, labor, capital, and entrepreneurial skill. Land – “Gifts of nature” or natural resources not created by human effort (i.e. oil, trees, cows, water …***What are some more?***  Land is fixed (limited) because it can be exhausted (used-up and not return)

Section 1 – Scarcity and the Science of Economics  Capital – Tools and equipment business and industry use to produce goods and services (Not monies which is financial capital!!!)  Easy way to remember capital – It’s something used by business that has already been produced (i.e. cranes, tools, iPads, etc.)  Essentially, it’s an investment!  ***In your groups, list 5 more and I will put them on the board.***

Section 1 – Scarcity and the Science of Economics Labor – Peoples’ efforts, abilities, and skills (Everybody except entrepreneurs)  Variables affecting labor: population growth, immigration, famine, war, and disease (***There are a ton more, but I left out a specific one. Which one am I thinking about? (Take 2- minutes)*** If your group gets it, doughnuts on me tomorrow morning!!!

Section 1 – Scarcity and the Science of Economics Entrepreneurs – Risk-takers in search of profits  They start new business  Create new products (goods) or services  Their innovation combines land, capital, and labor in unique ways to earn a living and provide we as citizens, something that can satisfy our wants.

Section 1 – Scarcity and the Science of Economics An entrepreneur, corporation, government, or an individual must answer 3 basic questions about economics to be successful.  What to produce: clothes, housing, food, transportation, etc.  Remember, resources are scarce and a society cannot have everything  How to produce: use more equipment and less human labor or use more human labor and less equipment  For Whom to Produce: as a society, we must decide who gets what. (See next slide)

Section 1 – Scarcity and the Science of Economics For whom are these houses produced for. Is there a huge demand for these houses in Baldwin? For whom are these houses produced for? How many will be produced? For whom are these houses produced for? Can you make a lot?

Section 1 – Scarcity and the Science of Economics The Meaning and Scope of Economics  Description – The process that is concerned with the 3 Basic Question of economics Additionally, description is concerned with: o Unemployment, inflation, international trade, the interaction of business and labor, and the effects of government spending and taxes (This is a huge topic in the upcoming Presidential Election between President Obama and Mitt Romney).  Analysis – An examination of prices, gaps in income among the 50 states, how taxes affect our behavior to save and spend, etc.  Explanation – Making economics more understandable to the people of our nation and the world.  Prediction – Determination of the consequences of a certain economic activity (i.e. Getting you guys new and more interesting textbooks [Where would the money come from, how would your folks react, how would it impact business, etc.?])