1. Introduction to Economics

2. The study of economics explains how productive resources are used to provide the goods and services that satisfy human wants and needs.
Scarcity is the fundamental economic problem facing all societies. We have limited resources and unlimited needs and wants.

3. Scarce Resources
Human
Natural
Capital

4. Needs v. Wants
Needs:
Food
Shelter
Clothing

5. Goods v. Services

6. Factors of Production:
Land (natural resources)
Labor (human resources)
Capital (equipment, machinery)
Entrepreneurship

7. Basic economic questions:
What goods and services will be produced?
How will goods and services be produced?
Who will consume the goods and services? (How should it be shared?)

8. The study of economics…
Economics is considered a social science. Why?
What do economists do?
What is the difference between microeconomics and macroeconomics?

9. Microeconomics and Macroeconomics
Decision making by individual units
Macroeconomics
Examines either the economy as a whole or its basic subdivisions or aggregates
LO3
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10. Positive and Normative Economics
Positive economics
Deals with economic facts
Normative economics
A subjective perspective of the economy
LO3
1-10

11. Theories, Principles, and Models
The scientific method
Observe
Formulate a hypothesis
Test the hypothesis
Accept, reject, or modify the hypothesis
Continue to test the hypothesis, if necessary
Economic principles
Generalizations
Other-things-equal assumption
Graphical expression
LO2
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12. Factors influencing economic development…
Technology
Specialization
Division of Labor

13. Other important concepts:
Trade-off
Opportunity Cost
Production Possibilities Curve (PPC)

14. Production Possibilities Model
Production Alternatives
Type of Product A B C D E
Pizzas
(in hundred thousands) 1 2 3 4
Industrial Robots
(in thousands) 10 9 7 4
Plot the Points to Create the Graph…
LO5
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15. Production Possibilities Model14 13 12 11 10 9 8 7 6 5 4 3 2 1
The law of
increasing
opportunity costs makes
the PPC concave. A B
Unattainable C
Industrial Robots U D
Attainable E
Pizzas
LO5
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16. A Growing Economy Economic Growth Now Attainable Unattainable14 13 12 11 10 9 8 7 6 5 4 3 2 1 B’
Unattainable A
Economic
Growth B C’ C
Industrial Robots D’ D
Now Attainable
Attainable E E’
Pizzas
LO6
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17. Present Choices, Future Possibilities
Compare Two Hypothetical Economies
Future
Curve
Future
Curve F
Goods for the Future
Goods for the Future P
Current
Curve
Current
Curve
Goods for the Present
Goods for the Present
Presentville
Futureville
LO6
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