1-1 What is Economics?

I. Scarcity and the Science of Economics A. TINSTAAFL(There is no such thing as a free lunch) 1. Free? a.Ex. Burger- Buy one get one free i. You get it free ii. Who pays for it? iii. Farmer, trucker, chef, server, owner iv. Maybe you!

TINSTAAFL Continued 1. The price is buried somewhere 2. The more given away, the more it has to charge(someone always pays)

B. Fundamental Economic Problem Scarcity- condition that arises when a society does not have enough resources to produce all the things people want

Cause of Scarcity? 2. Is not caused by the shortage of money a. EX. Everyone had Millions b. Things would still become scarce C. Supply would run out

Is not caused by the shortage of money. a.EX. Everyone had Millions b.Things would still become scarce c.Supply would run out Is caused by the lack of resources

Scarcity is not the same as Shortage Shortage- occurs when producers will not offer or cannot offer goods or services at current prices.

Temporary or Long Term Short Term- Seasonal, Holiday, etc… Long Term- Wars, drought, and depression

Scarcity and Shortage

Cause of Scarcity! 3. Is caused by the lack of resources

C. Factors of Production 1. Land- the “gift of nature,” or natural resources not created by humans a.Deserts, fields, forests, minerals, cattle, whales, sunshine, climate, etc…. b. Land is thought of as fixed(limited)

Factors of Production continued 1. Capital- the tools, equipment, and factories used in production of goods and services * Financial Capital- money used to buy goods

Factors of Production continued 1. Labor- people with all their efforts, abilities, and skills a. May vary in size over time B. Population growth, immigration, famine, war, and disease have an impact on quantity and quality

1. Entrepreneurs- is a risk taker in search of profit a.Innovators responsible for change b.The driving force of the economy i. New business Ii. New products

D. Three Basic Questions 1. What to Produce? a. Military, clothing, hosing, etc… B. A society cannot have everything, it must decide B.O. wishes he had this car

Three Basic Questions continued 2. How to Produce? a.Assembly lines and less labor? b.Less equipment and more labor? c.Lower costs mean less expensive and more available

Three Basic Questions continued 3. For Whom to Produce? a.If houses are produced i.Who gets them? ii. Work ers, professio nals, or governm ent b.Who will get the product

E. Meaning and Scope of Economics 1. Economics- study of human efforts to satisfy unlimited wants through scarce resources

Study of human efforts to satisfy unlimited wants through scarce resources

*So, what did you Learn?