Chapter 1 Economics Economics - is the study of human activity involved in using scarce resources to satisfy wants. - because wants are relatively unlimited and our resources are limited we have to find ways of dealing with the problem of scarcity.

What are Wants?? - Wants are the need or desire for goods and /or services. Goods can be seen and touched ( ex. bread, Ipod, clothes) Services are invisible, untouchable and used at the time of purchase. (Ex. air plane trips, rock concerts,a university course) =1#

- Wants are divided into two basic categories. Physical wants - are needed to sustain human life. They include : Air, water, food, shelter and clothing. These are the most important because they sustain life and are therefore also called Needs. Physical Wants = Physical Needs

Psychological wants - are wants for things not essential to maintain life. What limits us from acquiring our psychological wants?

RESOURCES !! Resources - are things which produce goods or services. RESOURCES !!

3 types of resources : 1 ) Human resources- skills and efforts people use to produce items. 2) Capital resources - physical items such as factories, machinery and money 3) Natural resources - land, forests, minerals, fish

Almost anything can be a resource. Money is a resource. Bubble gum cards or golf balls can be a resource. * Anything that can be used to acquire something else is a resource.

Scarcity - does not mean shortage. It means that it is impossible to have enough resources to produce enough goods to satisfy everyone’s wants. Whenever wants are greater than >> our resources there is scarcity. There is scarcity in terms of cars,clothes and food. Scarcity does not exist if no one wants it. Examples : AIDS, earwigs and winter coat in Brazil.

taxable-items-under-HST-released/1 The HST...it is coming... What does it have to do with Wants, Resources and Scarcity? ng=E PEI TAXABLE ITEMS LIST

Opportunity Cost - is the benefit lost of doing one thing rather than another. Example : You do homework rather than watch TV so the cost is missing your TV show. Try to do both at the same time? Lack of concentration on homework or on the TV is the cost.

When making decisions, we are choosing from different options. Choosing one option means that the other option becomes the opportunity cost. The ultimate cost is what is lost when choices are reduced to an either/or decision. Ex. #1 - Your resource is $ 2. You want a pop and a bag of chips but your limited resources allows for only one thing. You get the pop; the opportunity cost is the bag of chips.

Opportunity Cost = Opportunity Lost Exa mple #2 - You can have an apple, a pear or a banana. You choose to eat the apple over the banana. The banana alone is the opportunity cost. Our choices therefore are limited by the resources available to us.