Unit I – Scarcity & Choices

Goods and Services Goods – Physical Objects – Objects that are tangible Services – Actions or activities that one person performs for another

Factors of Production Land – Natural resources that are used to make goods and services Labor – The effort that people devote to a task for which they are paid Capital – Any human-made resource that is used to create other goods and services

Physical vs. Human Capital Physical Capital – Human-made objects used to create other goods and services – The term capital goods is a synonym for physical capital Human Capital – The knowledge and skills a worker gains through education and experience

Entrepreneurial Traits Independent Persistent Creative Hard Working Motivated Confident Thinks “Outside the Box” Risk Taker Personable Good Communication Skills Energetic Dedicated

Replicative vs. Innovative Entrepreneurs Replicative Entrepreneurs – Business owners who produce products and service already in existence on the market Innovative Entrepreneurs – Develop new, unique products or services, or develop innovative ways to improve the quality or usefulness of an existing product or services

Economizing Problem “We have UNLIMITED WANTS but LIMITED RESOURCES.” This causes the scarcity of everything.

Opportunity Cost The most desirable alternative given up when making a decision.

Economic Reasoning Costs vs. Benefits benefits costs benefit-cost analysis Whenever people decide whether the benefits of a particular action are likely to outweigh its costs, they engage in a form of benefit-cost analysis… Benefit >Do It!!! Benefit > Cost = Do It!!! < Cost Don’t Do It!!! Benefit < Cost = Don’t Do It!!!

Incentives Moral – One does or doesn’t do something b/c its is the right or wrong thing to do Social – One does or doesn’t do something b/c they desire or don’t desire to conform to what others (society) do Economic – One does or doesn’t do something b/c it helps or hurts them financially

Adam Smith Father of Economics Believer in Free Market Economy “Laissez-Faire” – The phrase is French and literally means “let do,” though it broadly implies “let it be” or “leave it alone.”

Adam Smith – “Invisible Hand” No government regulation is needed to promote the greater good of the economy. The “Invisible Hand” of the market place will guide individuals to pursue their own self- interests which in turn will also serve the greater good of the economy.

PPC Curve 4 main concepts a PPC Curve illustrates – Scarcity (Trade-offs) – Law of Increasing Opportunity Costs – A perfectly efficient economy produces on the curve; instead of inside it – Economic growth means pushing the frontier outward

Consumer Goods Capital Goods

Consumer Goods Capital Goods

Consumer Goods Capital Goods

Consumer Goods Capital Goods

Reasons why a PPC curve may shift Quantity of Resources Change in Quantity of Resources Available – Increase in Quantity; Curve shifts to the Right Quality of Resources Change in Quality of Resources Available – Increase in Quality; Curve shifts to the Right Technology Change in Technology – Increase in Technology; Curve shifts to the Right