1. Introductory Economics

2. Definition of Economics Unlimited wants and needs combined with limited resources results in scarcity. Therefore, Economics studies how limited resources will be used to satisfy unlimited wants. Studied at the larger level – macro and mini societies - micro

3. Macro vs. Micro Studied at two levels…. Macroeconomics – Studies the economic behavior and relationships of the entire society. Microeconomics – The study of relationships between individual consumers and producers. Economy can be strong at macro level and weak at micro or vice a versa

4. Economic goods – characteristics Must be physical or tangible It must be useful (must be able to satisfy human wants) It must be scarce (that means that there is not enough of it so everyone can freely have as much as they want of it) Must be transferable or easily obtained Note – consumer pay for some economic goods directly…. And other goods are paid for indirectly through taxes.

5. Economic Services Defined as productive acts that satisfy economic wants …. Must also be useful, scarce and transferable… BUT they are not tangible

6. Enhancing Economic Utility Economic Utility is the amount of satisfaction a consumer receives from the consumption of a particular product or service. Utility means usefulness in economics. Form utility – The physical product provided or the service offered. Time utility – This results from making the product or service available when the customer wants it. Place utility – Making products or services available where the customer wants it. Possession Utility – This results from the affordability of the product or service.

7. Consumer and Industrial Goods (economic classification Consumer All the goods and services that are purchased and actually used by the ultimate consumer. An ultimate consumer is anyone who personally uses a good or service to satisfy his/her own wants. Industrial Goods All the goods and services that are purchased by producers. Producers – the people who make or provide goods and services for resale, to make other goods and services or for use in operating their businesses. Anything used by a business to carry out business activities.

8. Consumer and Industrial Goods (economic classification Consumer All the goods and services that are purchased and actually used by the ultimate consumer. An ultimate consumer is anyone who personally uses a good or service to satisfy his/her own wants. Industrial Goods All the goods and services that are purchased by producers. Producers – the people who make or provide goods and services for resale, to make other goods and services or for use in operating their businesses. Anything used by a business to carry out business activities.

9. Economic Systems An economic system is the organized way in which a country handles its economic decisions and solves its economic problems. In other words, it’s the way in which a country makes its earning and spending decisions No two nations have the same system, there are certain elements found in all economic systems: resources (natural, human, capital). Markets – the arrangements for the buying and selling of goods made up of both buyers and sellers. Participants - include, producers, consumers, and government. Medium of exchange – Something of value that can be used to obtain goods and services. Most common medium of exchange is money. We need economic systems because our wants and unlimited but are recourses are not. People in all economic systems are interdependent

10. Elasticity An indication of how changes in price will affect changes in the amounts demanded and supplied Elastic demand – changes in price correspond to a changes in demand Inelastic demand – exists when the demand for a product or service is constant, even if the product’s price changes Factors that determine elasticity – how essential is the good for human survival, availability of substitute products, how expensive is the item

11. Economic Risks Natural Risk – Caused by the unpredictability of nature such as weather or earthquake. Human Risk – Arises because of potential actions of individuals, groups, or organizations. Economic Risk – The uncertainty associated with market forces, economic trends, and politics.

12. Classification Continued Pure risks – Present the chance of loss but no opportunity for gain. Speculative risks – Chance to gain as well as chance to loose. Controllable risks – Can be reduced or avoided by your actions. Uncontrollable risks – Your actions do not affect the result of a risk.

13. Economic Resources We must choose which wants to satisfy at any one time because our resources are limited Natural – any resource found in nature and used to produce goods and services (air, land, minerals) Human – people are our human resources – valued for the work they produce Capital – all of the manufactured or constructed materials used in the production of goods and services ( buildings, equipment, machinery) Opportunity cost – the cost associated when giving up an item

14. Key Economic Questions Economic systems determine: What will be produced? How will products be produced? How will products be allocated?

15. Econ Facts Economizing – process used in deciding which goods and services to purchase or provide Opportunity cost – what you give up when you make a choice between more than one product or service Trade offs – resource owners must be willing to take less of one thing in order to receive more of something else (fewer quantity for more quality)

16. Consumption Process or activity of using goods and services Anyone who uses goods or services to satisfy his/her unlimited wants is called a consumer

17. Distribution Examines how the money payments received by resource owners and producers are divided and distributed Money received by resource owners and producers is known as income Resource owners use their income to buy more goods and services /Producers use income to buy more resources Income distribution related to economic systems Value attached to money payments depends on productivity, demand, and availability of supply

18. Production In order for consumption to occur, goods and services must be made or produced The people who make or provide goods and services are called producers Resource owners provide human, natural, and capital goods for production activities

19. Exchange Producers, consumers, and the owners or resources exchange money payments. Money payments for human resources are called wages, salaries, and profits Consumers make money payments to producers. This money payment is known as price.

20. Productivity The amount of goods and services produced from set amounts of resources. Inputs – all the resources used in producing goods and services Outputs – the goods and services produced as the result of combining inputs Equation is outputs/inputs What equation could we use to determine our productivity in the store ?

21. answer Final number from deposit slip/hours of operation Final number from deposit slip / number of sales people Common equation used in retail sales is = sales per hour – used to measure salesperson effectiveness – amount of hours an employee receives is often reflective upon his/her sales per hour

22. Why measure productivity To show trends in business conditions To see whether productivity is increasing or decreasing To evaluate employee effectiveness Etc.

23. Effects of productivity  Productivity helps to keep consumer prices down. On the other hand, when productivity decreases inflation occurs to offset higher production costs.  Effects on the economy – GDP measures a country’s productivity  On businesses – when employees are effective, businesses should have more profits  Average worker’s productivity is called GDP per capita (GDP/population)  The only way that a country’s economy can grow is when its GDP per capita grows at a faster rate than its population