1. WHAT IS ECONOMICS? Economics: the study of
how individuals, businesses,
and societies seek to satisfy
their needs and wants by
making choices.
Why must we make choices/decisions?
Scarcity

2. SCARCITY
Scarcity: There are limited quantities of resources to meet our unlimited needs and wants for goods and services
Scarcity is an
ever-present
situation unlike
shortages, which
are temporary

3. Goods – physical objects such. as shoes and shirts
Goods – physical objects such as shoes and shirts (consumer and capital)

4. Services – actions or activities that one person per- forms for another such as haircuts or dental checkups

5. Goods and services are scarce because they are made from scarce resources…
...another term for the resources necessary to make all goods and services is…

6. FACTORS OF PRODUCTION
Land: all natural resources used to produce goods and services (and not used up in the consumption of those goods and services)

7. FACTORS OF PRODUCTION
Labor: the effort that a person devotes to a task for which that person is paid.

8. FACTORS OF PRODUCTION
Capital (physical and human): any human-made resource that is used to produce other goods and services

9. FACTORS OF PRODUCTION (capital continued)
Physical capital (capital goods): human-made object used to create goods and services
Human capital: the knowledge and skills a worker gains through education and experience

10. Put the following items in their proper place in your notes.
Propane
Knowledge of recipe
Oven
A baker baking
Water (to wash)
Mixing bowls
Apple Pie
A server serving
Culinary school degree
Taxicab
Driver’s license
A taxi ride
Oil
Driver driving
Rubber
Cellphone
Street knowledge
Dispatcher dispatching

11. ENTREPRENEURS
Entrepreneurs: risk-takers who decide how to combine the factors of production to create new goods and services

12. GUNS OR BUTTER?
All decisions involve trade-offs: the alternatives we give up whenever we choose one course of action over another
“Guns or butter” is a simplification of the trade-offs countries face.
Resources devoted to producing “guns” (military goods) cannot be devoted to producing “butter” (consumer goods) and vice versa.

13. “Opportunity cost is opportunity lost”
Opportunity cost: the most desirable alternative given up as the result of a decision.

14. Individual
Situation: A high school senior is deciding where to go to college. She wants to experience a different part of the country so she is seriously considering going out-of-state. However, she is also very close to her family and friends, many of whom will be staying local. Questions: What does she do? What is the opportunity cost of her decision?

15. Business
Situation: A popular and profitable regional restaurant wants to expand across the country in order to maximize profits. In doing so however, it will be more difficult to maintain the quality control it is known for and its regional reputation may be tarnished. Questions: What does it do? What will be the opportunity cost of that decision?

16. SOCIETY
Situation: A notoriously smoggy city wants to clean up its air by forcing businesses to abide by new, stricter environmental regulations. In doing so however, it may force some businesses to close or move, taking away much-needed jobs. Questions: What does it do? What is the opportunity cost of that decision?

17. The Opp. Cost of Cheap Oil
Questions: What is the opportunity cost of _________? cheap oil for American workers in the energy-sector? Answer: Loss of relatively high-paying middle-class jobs in the oil and related industries.

18. The Opp. Cost of Cheap Oil
Questions: What is the opportunity cost of _________? higher oil prices for the American consumer? Answer: They have to pay higher gasoline prices, meaning they have less money to spend on other goods/services (and then fewer jobs in those industries).