Economics: the study of choice

Questions for review 1. What is the central problem that you face when you make economic choices? 2. What are the examples of productive resources you use in your life? 3. How can you tell whether the food you eat from your refrigerator is scarce?

Questions for review 1. What is the central problem that you face when you make economic choices? Scarcity-Although my desires are virtually unlimited, the productive resources available to help satisfy my wants are scarce

Questions for review 2. What are the examples of productive resources you use in your life? Ex- Rain that waters your lawn (natural resource) After school work (human resource) Shovel to move snow off the walk (capital good)

Questions for review 3. How can you tell whether the food you eat from your refrigerator is scarce? Any good or service that has a price that exceeds zero is scarce. Someone paid for the food in your refrigerator; therefore it is scarce

Questions to review 4. Identify each of the following as a human resource, natural resource, or capital resource: A. a hammer used to build a wooden box B. the tree that was cut down to make lumber to build a wooden box. C. the effort used to nail lumber together to make a wooden box

How do you spend your money? Draw a pie chart that demonstrates how you spend the money you have on average. (make sure it adds up to 100%)

Warm-up How do you make choices? How many choices do you make in a day? What was the best choice you have made recently?

Costs There is a cost to everything (even if you don’t pay for it). Think cause and effect.

Re-cap… Opportunity cost Scarcity Capital resources Human resources Natural resources

Macroeconomics (national economics) Focuses on the national performance of the economy. The big picture. Predicts outcomes based on trends. What are some examples of macroeconomics?

Microeconomics (market economics) Focus is on individual choices. The small picture What are some examples of microeconomics.

The mad, mad world of Circular Flow Graphs!!! Circular flow graphs are used to explain the flow of goods and services through the economy. Four main components: Firms (businesses)-are primarily producers of goods/services Households (individual)-are primarily consumers of goods/services Resources markets (factor markets)-Where resources are bought and sold Product markets-Where goods and services are bought and sold

Circular flow

Lets practice Larry works for a phone company making cell phones. He saves $50 from every $500 he earns. Yesterday, he used part of his savings to make a $4,000 down payment on a new car. Draw and label a simple Circular-flow graph