1.Explain the fundamental economic problem. 2.Examine the 3 basic economic questions that every society must answer. 3.List & give examples of the 4 factors of production.

scarcityeconomics needwant landcapital financial capital labor entrepreneur

Economics: Study of how people try to satisfy unlimited wants with limited resources **#1 Rule of Economics: TINSTAAFL (means?) Most people want more than they already have (Don’t you?!)

Basic Economic Problem : SCARCITY – condition resulting from society not having enough resources to produce all the things people would like to have Needs vs. Wants

3 BASIC QUESTIONS EVERY SOCIETY MUST ANSWER: 1.What to produce 2.How to produce 3.For whom are the products are being produced

4 FACTORS OF PRODUCTION 1. Land Must be natural & is limited

2. Capital Tools, equipment, machinery, factories used for production

3. Labor

4. Entrepreneurs Risk takers in search of a new business

1.Explain the relationship between goods, services, scarcity, value, utility & wealth. 2.Understand the circular flow of economic activity.

economic productgood consumer goodcapital good servicevalue paradox of valueutility wealthmarket factor marketproduct market economic growthproductivity human capital

Economic Products - goods & services that are useful, relatively scarce & transferable 4 Types of Goods (give 4 examples of each): 1. Consumer - used by? 2. Capital – used to? 3. Durable – lasts for? 4. Nondurable – lasts for? Service – work performed by someone

Econ. products must have 2 things : 1.Value – worth expressed in dollars & cents Paradox of value – some necessities have little value whereas some non- necessities have higher value Ex. “diamond-water paradox” Why? Scarcity!

Economic products must have (cont’d) 2. Utility – capacity to be useful & provide satisfaction (not measurable, different for everyone) Wealth – sum of tangible goods that are scarce, useful & transferable from one to another (services not included)

Circular Flow of Economic Activity  Markets – locations/mechanisms that allow buyers & sellers to trade (can be local, regional, national, global)  Factor Market – where productive resources are bought & sold (where you make your $)  Product Market – where goods & services are sold (where you spend your $)

Economic growth occurs when a nation’s total output of goods and services increases over time Productivity – measure of the amount of output produced by a given amount of inputs in a specific time period Investing in human capital (sum of the skills, abilities, health & motivation of people) contributes to increasing productivity

1.1.Analyze trade- offs & opportunity costs Explain the reasons for studying economics.

trade-off opportunity cost production possibilities frontier cost-benefit analysis

Matt has 2 choices for a summer job. The 1 st opportunity is at a computer manufacturer, where he would earn $10.25 an hour. The 2 nd is with a landscaping company, where he could work & have lunch with 3 of his closest friends every day. That job would pay $8.65 an hour. For one 40-hour workweek, what would be the opportunity cost, in dollars, of accepting the landscaping job? What would be the opportunity cost of accepting the manufacturing job?

Cost-Benefit Analysis Cost-Benefit Analysis: The benefit should outweigh the cost Economics for Citizenship Economics for Citizenship : Studying economics will not tell you what decisions to make, but it will help you become a better decision- maker