1. Chapter 1 What is Economics

2. Objectives 1)Explain why scarcity and choice are basic problems of economics. 2)Indentify Land, Labor, and Capital as the three factors of production, and identify the two types of capital. 3)Explain the role of the entrepreneur. 4)Explain why economists say all resources are scarce.

3. What is Economics Scarcity exists because we can not have everything we want or need Scarcity implies we have limited resources and unlimited wants Economics is the study of how people deal with scarcity or Economics is the study of how people make choices to meet their needs and wants

4. The Factors of Production Land is the natural resources used to produce goods and services Examples>>> farmland, coal, water, forests.

5. Labor is the effort that a person devotes to a task and is rewarded with income Example factory work, doctors, carpenters, teachers

6. Capital is a human made resource that is used to produce other goods Physical Capital is a building or tool that help increase production. The goal is to save time and money Examples, hammer, assembly line, shovel, etc Human Capital is the knowledge and skills that a worker gains through education and experience Example, on the job training, college, tech schools, continuing education

7. Entrepreneurs Entrepreneurs combine land, labor and capital to create goods and services America takes pride in creating entrepreneurs

8. Objectives Explain the concept of opportunity costs. Explain how people make decisions by thinking at the margin.

9. Trade-Offs=alternatives that we give up whenever we choose one course over another Individuals= should I read a book or watch TV Business= should we pay out dividends to stockholders or invest in research and development Society makes a choice to produce guns or butter…… a country can not provide programs and fight a war

10. Opportunity Cost The most desirable alternative given up as the result of a decision.

11. Thinking at the Margin Instead of thinking all or nothing you can add or subtract units of time, money, labor, etc…….. Example= when determining the opportunity cost of sleeping versus studying think about sleeping for a set period and studying for a set period

12. Objectives Interpret a production possibilities curve Understand that a country’s production possibilities depend on its available resource and technology

13. Production Possibility Curve A production possibilities curve shows alternative ways to use an economy’s resources.

14. WatermlsShoes 015 814 12 189 205 210

15. Efficiency means using all available resources Underutilization means fewer resources than the economy is capable or using 5 water, 8 shoes Growth If the quantity or quality of available land, labor, or capital changes then so will the production possibility chart Examples..immigra nts, tractors, floods

16. Watermelons`Shoes 020 818 16 2212 24 26 6060

17. Cost is the alternative we give up when we choose one option over another. At one point it cost 1 million shoes to produce 8 million watermelons At another point it would cost 5 million shoes to produce 1 million more watermelons

18. Objectives 1)Explain why scarcity and choice are basic problems of economics. 2)Indentify Land, Labor, and Capital as the three factors of production, and identify the two types of capital. 3)Explain the role of the entrepreneur. 4)Explain why economists say all resources are scarce.

19. Objectives Explain the concept of opportunity costs. Explain how people make decisions by thinking at the margin.

20. Objectives Interpret a production possibilities curve Understand that a country’s production possibilities depend on its available resource and technology