What is Economics?

Economics Study of how people seek to satisfy their needs and wants by making choices.

Dissecting the Definition Needs: something like air, food, shelter that is necessary for survival Wants: an item that we desire but that is not essential to survival

Additional Info/Vocabulary Terms Allocate  to divide among or distribute in shares

Activity In your groups, answer as many questions correctly as you can. Each correct answer gets bonus points for your team! Now, decide how you would allocate your bonus points between your group members  How many different ways could you allocate your resources?  Which method did you choose and is it fair?  Is every member of your group satisfied?

Additional Info/Vocabulary Terms Resources  the means to accomplish something

Econ’s No.1 Problem… Scarcity:  When there is not as much of a good or service as everyone wants. Do you have as much money as you could possibly want? When the new iPad/iPhone hits the market, is it immediately available for everyone?

How do you deal with scarcity? Everyday you are making tons of economic decisions; more commonly referred to as choices.  What are some choices you have made today? This week? This year? What information do you weigh when making a decision or choice?  Want vs. Need, cost, efficiency, items you are missing out on, etc.

Dissecting choices Trade-Off: giving up some of one thing to obtain more of the next best alternative Opportunity Cost: what was given up in a trade-off, the next best alternative

Which would you choose? You have 1000$ in graduation money….. 1) Buy new clothes 2) Buy “stuff” for your car 3) Take a vacation before college

What was your second choice? 1) Buy new clothes 2) Buy “stuff” for your car 3) Take a vacation before college

Microeconomics  Study of economic behavior & decision making of small units, such as individuals, families, & businesses  Individual decision making is micro (small)

Macroeconomics  Study of economic behavior & decision making of entire economies  Examines major trends for the economy as a whole  Societal decision making is macro (large)

Three Basic Questions??? In economics there are 3 basic questions that every country must answer…  What to produce?  How to produce?  For whom should we produce?

Economic Systems A set of rules by which a nation answers the basic questions of what, how, and for whom.

Types of Economic Systems Traditional Command Market Mixed

Traditional Decisions are based mostly on customs Difficult to change Mostly in underdeveloped countries/3 rd world countries Example: Chad

Traditional Advantages versus Disadvantages Advantages Low unemployment rate Little or no money is used Disadvantages Not much economic growth Little scientific development No choices Low standard of living

Command Government ownership & control of production Government makes ALL decisions 2 main types Socialism & Communism Example: North Korea

Command Advantages versus Disadvantages Advantages Focuses on Equality Capable of rapid change Economies are very stable Disadvantages Very little individual freedom No reason for hard work

Market Means of production are owned & controlled by private individuals or groups Government plays a small role Market determines how resources are used Cannot be found today

Market Advantages versus Disadvantages Advantages Can adjust easily to change Competition No government interference Unlimited opportunities to make money Disadvantages Society does not always get basic needs Higher risk for failure Monopolies are present

Mixed Government plays limited but some role in decision making Focuses on Free Enterprise System Usually 70% individual control & 30% government control  Sometimes other way around but very rare Example: United States

Additional Info/Vocabulary Terms Division of Labor  Separate the process of production into specific tasks

Additional Info/Vocabulary Terms Specialization  Concentrate labor on single tasks