Economics Chapter 1 Notes

I.What is Economics? A. The study of how a person, a society, a government… 1. Makes choices regarding its resources. 2. Allocates its resources because resources are scarce.

II.What is scarcity? A. Lack of resources 1.Not having enough of the resources 2.Having more than 1 valuable way to use the resources

B. What causes scarcity? 1. Rapid increase of demand 2. Poor distribution 3. Personal perspective

III. Wants and Needs A. Resources are needed to fill our needs and wants. B. Needs- what you have to survive.

1. Basic needs a. food b. clothing c. shelter Do we really have needs? Does choice play a role in this?

C. Wants- Everything that you desire. D. Wants are unlimited

IV. Goods and Services A. Two roles in economic society 1. Producers 2. Consumers

B. Consumers 1. When you use products (goods) or services for yourself and not for resale.

C. Producers 1. Someone who provides goods and/or services.

D. Goods and Services 1. Goods: products consumers buy to satisfy wants

2. Services: actions by producers to satisfy wants and needs a. Teaching, painting, mechanic, plumber, etc.

V. What are three types of resources? All resources are LIMITED!!!

Human Resources 1. Labor - workers

B. Natural Resources 1. Land – lumber, oil, coal, 2. Products from the earth (renewable vs. nonrenewable)

C. Capital Resources 1. Capital is money, machinery, or factories

VI. What question must every society answer? A. What will we make? 1. What products or services to be made depends on resources.

B. How will we produce or make the products? 1. Use of technology, by hand?

C. Who will get the goods? 1. Everyone or just a few? 2. Distribution

D. Are we going to save any resources for the future? 1. reduce, reuse, recycle

VII. How we deal with scarcity? A. Do without the item B. Redistribute resources C. Recycle D. Create new resources 1. Example: Solar Power

VIII. Opportunity Costs/Real Costs A. Real Costs 1. Costs of the resources used to produce goods and services

B. Opportunity Costs 1. Value of time, money, goods, and services given up in making choices.

C. Trade-off 1. A choice between use of resources

D. Economic Model 1. Used to understand economic problems and study trade offs

E. Production Possibility Model 1. Only two goods produced 2. Resources can be used to produce both 3. Trade off 4. Economics is the study of the trade offs.