Economics – Ch.1, Sec. 1 ⇨ Study of choices that people make to satisfy their needs and wants ⇨ MICRO – Study of single economic actor (individuals, households, corporations) ⇨ MACRO – Behavior of entire economies ⇨ Consumers – people who decide to buy goods and services ⇨ Producers – People who produce goods and services to satisfy consumer needs and wants

Economics – Ch.1, Sec. 1 ⇨ PRODUCERS ----> ⇨ FACTORS OF PRODUCTION: ⇨ 1) Natural Resources (LAND- oil, cotton, etc) ⇨ 2) Human Resources (LABOR - Physical or Intellectual) ⇨ 3) Capital Resources (CAPITAL – money, buildings, machines, tools, etc) ⇨ 4)Entrepreneurship ⇨ PRODUCTS/SERVICES --> CONSUMERS

Economics – Ch. 1, Sec. 2 ⇨ SCARCITY ⇨ Unlimited wants and needs vs. limited resources ⇨ Choices need to made - ⇨ Three basic questions for any economy - ⇨ 1) WHAT to produce? ⇨ 2) HOW to produce? ⇨ 3) FOR WHOM to produce?

Economics – Ch. 1, Sec. 2 ⇨ PRODUCTIVITY - ⇨ Level of output from a given level of input ⇨ Example: If 100 people can produce 1000 computers in a day, what is their productivity? ⇨ 1000 computers/100 people = 10 computers per person ⇨ EFFICIENCY - ⇨ Use of smallest amount of resources to produce greatest amount of output

Economics – Ch. 1, Sec. 3 ⇨ OPPORTUNITY COST ⇨ The value of the next best alternative given up to obtain the preferred item ⇨ Trade-off ⇨ PRODUCTION POSSIBILITIES CURVE ⇨ All possible combinations of two goods (services) that can be produced in a given time period ⇨ Example: Produce economy cars or luxury cars? Economy Luxury A05 million B2.8 million4.2 million C4.5 million3 million D6 million1.5 million E7 million0

Opportunity Cost ⇨ TWO key assumptions: 1) Amount of available resources will NOT change 2) ALL resources used most efficiently What would point G represent? What about point F? What is the opportunity cost of economy cars in terms of luxury cars?

Ch. 1, Sec. 4 - Exchange ⇨ Exchange - ⇨ Producers and consumers agree to provide one type of item in return for another ⇨ Forms of exchange: ⇨ 1) Barter - ⇨ Exchange one set of goods for another ⇨ Problems? ⇨ 2) Money - ⇨ Any item that is readily accepted by people in return for goods and services

Exchange (cont) ⇨ Functions of money: ⇨ Standardized item traded for goods/services ⇨ Measure of value that allows producers and consumers to express worth ⇨ A store of value that can be saved ⇨ 3) Credit - ⇨ Allows consumers to use items before completing payment ⇨ Credit cards ⇨ Loans (secured v. unsecured)

Exchange (cont) ⇨ Value? ⇨ Utility - ⇨ Usefulness of a good/service to a person ⇨ Utility + scarcity = value (price) ⇨ Water - ⇨ High utility, low scarcity ---> lower value ⇨ Diamonds - ⇨ High utility, high scarcity ---> higher value