INTRO TO ECONOMICS

What is economics??  Efficient use of scarce resources  Study of how individuals and society, experiencing limitless wants, choose to allocate its scarce resources. What do people Want/Desire?? EVERYTHING! ALWAYS!

Economic Questions  Scarcity= Limited resources v unlimited wants  3 economic questions 1. What to produce? 2. How to produce it? 3. For whom?

Why Study Economics?  We have unlimited wants in a world of scarce resources  Econ focuses on the best use of scarce resources  Scarcity causes Opportunity Costs:  Opportunity cost Forgo something to get the other “Cost of doing business” Sleep v. study

5 Factors of Production 1. Land: All natural resources 2. Labor: Human work 3. Capital: All human-made means of production 4. Technology: Innovation and Design 5. Entrepreneurs: Risk takers, business owners, inventors, etc.

Economic Systems  What are “economic systems”  Institutions who determine, who, what, where to produce 1. Traditional System:  Solves the economic problems through custom and tradition  What to Produce: Past habits  How to produce: not efficient— old habits  For Whom?: Strict rules/social classes/communally

2. Command System  Solves economic problems through government authority  What to produce: Determined by Gov. & authority  How to produce: Determined by Gov. & Authority  For Whom: Determined by Gov. & Authority  Examples: Cuba, Former Soviet Union, North Korea

3. Market System  Solves economic problem answered through Supply and Demand **System is driven by making profits**  What to Produce: What makes $$  How: What ever maximizes $$  For Whom: Whoever wants to pay

Capitalism  System where the Individual not the government makes decisions  Basic Freedoms of Capitalism 1. Free enterprise: Freedom to start and operate own business 2. Private Property: Right to own 3. Freedom of Choice— Choose between goods and services