1. What is Economics?
The study of how people satisfy their wants and needs by the choices they make

2. 2 Categories of Economics
Microeconomics
Macroeconomics
The study of the choices of households, companies, and individual markets
The behavior of entire economies (nations )

3. SCARCITY Basic Economic Problem
People have unlimited wants and needs but have limited resources.
Forces people to make choices in how to allocate their resources effectively to get what they want.

4. Who Makes Economic Decisions?
Consumers
Producers

5. SCARCITY
We have _________ wants and needs.
We have _______ resources.
Therefore, we must make ______

6. Economic Choices GOODS SERVICES
Physical objects Examples: Pizza, Car, Shoes
Actions or activities performed by a fee
Examples: Lawyer, Hairstylist, Cab driver

7. Factors of Production
Natural Resources (land)
Human Resources (labor)
Capital Resources (capital)
Entrepreneurship

8. Natural Resources (land)
Items provided by nature, in the Earth or the Earth’s atmosphere, that can be used to produce goods and services
Must be scarce and some form of payment is necessary for its use

9. Human Resources (labor)
Any human effort that goes into the production of a good or service. Can be physical or intellectual.

10. Capital Resources
Manufactured materials used to create products, including capital goods AND the money used to purchase them.
Capital Goods – The buildings, structures, machinery, and tools used in the production process

11. Entrepreneurship Assembles the factors of production
Takes the necessary risk in starting a new business or developing an innovative product or service

12. Opportunity Cost Trade offs and Opportunity Costs—
Trade off—One good is sacrificed for another; the sacrifice is a trade off.
Opportunity Cost—The value of the next best alternative given up to obtain an item
Most choices have many alternatives
They all are trade offs but only the 2nd best choice is the opportunity cost.

13. Opportunity Costs Example
You have $50 and it’s Friday night:
Go to the Perry High School football game
Go out on a date
Pizza and games with the family
Go to the mall and a movie with friends
Get all of your homework for Monday done early

14. Cost/Benefit Analysis
Friday Night Choices
Benefits: Financial, Social, Educational, Future, Family
Costs: Financial, Social, Educational, Future, Family
Perry High football game
Date
Family Night
Mall & Movie
Homework

15. Production Possibilities
Trade offs and opportunity costs can be illustrated using a Production Possibilities Curve.
PPC—shows all the possible combinations of 2 goods or services.
Two assumptions:
1. Fixed resources
2. Maximum efficiency.

16. Current Production Possibilities
Current Production Possibilities Curve—Shows the possible production options that would be available if a company concentrated their resources on two possible alternatives.
Economy
Luxury A
5 mil B
2.75 mil
4.25 mil C
4.5 mil
3 mil D
6 mil
1.5 mil E
7 mil

18. Future Production Possibilities
Real World—Technology and the factors of production do NOT remain constant. Production curve shifts when technology/new resources become available.
The curve “shifts to the right” to show new production possibilities.

20. Productivity Productivity Goal
Definition: The level of output that results from a given level of input.
Productivity Goal
Efficiency – The use of the smallest amount of resources to produce the greatest amount of output
Division of Labor, Specialization, machinations, technology, overtime, layoffs 20