Bell Ringer:  What material things would you like to own?  Make a list!

Chapter 1: What is Economics? Activity: Make a list of all the things you would like to own.

1.1 The Fundamental Economic Problem  Scarcity is the condition where unlimited human wants face limited resources. –There’s not enough resources to produce all we want!  Economics is the study of how people satisfy wants with scarce resources. Needs are required for survivalNeeds are required for survival Food, clothing, and shelterFood, clothing, and shelter Wants are a way of expressing a need. A want may not be required for survival.Wants are a way of expressing a need. A want may not be required for survival. Pizza, house with a pool, a car with leatherPizza, house with a pool, a car with leather

TINSTAAFFFL There Is No Such Thing As A Free LunchThere Is No Such Thing As A Free Lunch –Even it is FREE to us, someone has to pay for production costs. –“BOGO” –Sometime, somewhere you will pay for it!

Three Basic Questions What TO produce? Society must choose based on its need.What TO produce? Society must choose based on its need. How TO produce it? Society must choose how a product is made.How TO produce it? Society must choose how a product is made. For WHOM should we produce? Society must choose who to make it for.For WHOM should we produce? Society must choose who to make it for.

The Factors of Production Factors of production are resources necessary to produce what people want or need. Land is the society’s limited natural resources— landforms, minerals, vegetation, animal life, and climate. Capital is the means by which something is produced such as money, tools, equipment, machinery, and factories.

LaborLabor is the workers who apply their efforts, abilities, and skills to production. is the workers who apply their efforts, abilities, and skills to production. EntrepreneursEntrepreneurs are risk-takers who combine the land, labor, and capital into new products.are risk-takers who combine the land, labor, and capital into new products. ProductionProduction is creating goods and services—the result of land, capital, labor, and entrepreneurs. is creating goods and services—the result of land, capital, labor, and entrepreneurs.

The Scope of Economics  A social science –Study of human behavior on satisfying unlimited wants.  Description –Gross Domestic Product (GDP): the $ value of all final goods and services produced in a country in 12 mths. –Unemployment, inflation, trade, business and labor, gov’t spending, and taxes.  Analysis –The “WHY and HOW” questions  Explanation –Answering the HOW and WHY questions  Prediction –How people are going to behave in the current market.

Study for 1.1 Quiz is the condition where unlimited human wants face limited resources.  1) ______ is the condition where unlimited human wants face limited resources.  2) ______ is the means by which something is produced such as money, tools, equipment, machinery, and factories.  3) _____ are required for survival.  4) What does TISNTAAFL stand for?  5) What are the 3 basic economic questions?

Goods, Services, and Consumers 1.2 Goods, Services, and Consumers Economic ProductEconomic Product Goods and services that are useful, scarce, and transferable.Goods and services that are useful, scarce, and transferable. GoodsGoods are items that are economically useful or satisfy an economic want.are items that are economically useful or satisfy an economic want. Consumer: are intended by use by YOU!Consumer: are intended by use by YOU! Capital: manufactured goods are used to produce others goods and services.Capital: manufactured goods are used to produce others goods and services. Durable: Lasts 3 or more years when used regularly.Durable: Lasts 3 or more years when used regularly. Nondurable: Lasts less than 3 years when used regularly.Nondurable: Lasts less than 3 years when used regularly.

ServicesServices Are product or work performed for someone and are intangible.Are product or work performed for someone and are intangible. Consumers use goods and services to satisfy wants and needs.Consumers use goods and services to satisfy wants and needs.  Why is the US called “nation of consumption”?

Value, Utility, and Wealth ValueValue is worth expressed in dollars and cents. Scarcity by itself is not enough to create value.is worth expressed in dollars and cents. Scarcity by itself is not enough to create value. PARADOX of VALUE: Why do some things have more worth than others?PARADOX of VALUE: Why do some things have more worth than others? Some necessities have no value & non-necessities have valueSome necessities have no value & non-necessities have value UtilityUtility is a good’s or service’s capacity to provide satisfaction, which varies with the needs and wants of each person.is a good’s or service’s capacity to provide satisfaction, which varies with the needs and wants of each person. WealthWealth is the accumulation of goods that are tangible, scarce, useful, and transferable to another person.is the accumulation of goods that are tangible, scarce, useful, and transferable to another person. Wealth does not include services.Wealth does not include services.

The Circular Flow of Economic Activity Markets are locations for buyers and sellers to trade. They are classified as local, regional, national, global, and cyberspace.Markets are locations for buyers and sellers to trade. They are classified as local, regional, national, global, and cyberspace.  A factor market is where people earn their incomes. A product market is where people use their income to buy from producers. Product markets center on goods and services.A product market is where people use their income to buy from producers. Product markets center on goods and services.

Productivity  Economic Growth –Occurs when a nation’s total output of goods and services increase.  Productivity –Amount of output produced by a given amount of inputs in a specific period of time.  Division of Labor –Work is arranged so that workers do fewer tasks than before.

 Specialization –The performance of tasks that can be done relatively efficiently than others EX> Henry Ford’s assembly line  Human Capital –Sum of skills, abilities, health, and motivation of people. Education, health care, continuing Ed, training  Investing –Businesses must invest in their employees  Interdependence –We rely on others and others rely on us to provide goods and services that we consume. EX> Writer’s Strike, Automaker Crisis

Review Section 2 Notes I. ______ is the sum of skills, abilities, health, and motivation of people. II. _______ is worth expressed in dollars and cents. III. _____ __ _____ Why do some things have more worth than others? Some necessities have no value & non-necessities have value. IV. ______ market is where people earn their incomes. V. ______ are product or work performed for someone and are intangible.

VI ______ are items that are economically useful or satisfy an economic want. VII _____ goods that last more than 3 years when used regularly. VIII _____ is a good’s or service’s capacity to provide satisfaction, which varies with the needs and wants of each person. IX _____ is the accumulation of goods that are tangible, scarce, useful, and transferable to another person. X _____ ___ ______ is when work is arranged so that workers do fewer tasks than before.

1.3 Trade-Offs and Opportunity Cost Trade-offs are the alternative choices people face in making an economic decision. A decision-making grid lists the advantages and disadvantages of each choice. Opportunity cost is the cost of the next best alternative among a person’s choices. The opportunity cost is the money, time, or resources a person gives up, or sacrifices, to make his final choice.

Identifying possible alternatives allows an economy to examine how it can best put its limited resources into production. Cost-benefit analysis helps economists evaluate alternatives by looking at each choice’s cost and benefit. The study of economics helps people understand how a free enterprise economy makes the WHAT, HOW, and FOR WHOM decisions.