1. 406
is the study of how we make decisions in a world where resources are limited.

2. 419
is the branch of economics that studies the behavior of small units in an economy, such as the pricing policy of a business or household decisions on what to buy.

3. The fundamental economic problem of
The fundamental economic problem of occurs when we don’t have enough resources to get all the things we desire.
407

4. It is the problem of scarcity, such as limited time or money, that forces us to make among alternatives.
407

5. 410
The alternatives we all face in life when we have to decide to do one thing or another are called

6. 411
The value of what you give up when you have made a choice between trade-offs is called the

7. 407
are required for survival and include things such as food, water, transportation, shelter and clothing.

8. 407
are things that we wish for, crave or desire for entertainment, comfort or out of basic greed or envy of others.

9. The factors of production

10. The factors of production (resources)

11. Natural Resources (Land)
All the resources that come from nature.
Gifts of the Earth
Used in or for the products you need or want.

12. Labor (human capital) A country’s human resources.
Labor requires workers in order to produce goods and services.
Some nations still use a great deal of child labor

14. Capital The tools, machinery, and buildings used to make products.
Capital goods aid the production of consumer goods.
Capital goods are purchased with financial capital ($$$)

15. Entrepreneurs The individuals who start new businesses and innovate
Risk takers
Driving force of the economy

16. Economic Models and Graphs
Charts, graphs, maps diagrams, models, simulations
Make the complex simple, make the large small
Understand it
Predict it
Change it
Use it
Improve it
Repair it
Manipulate it

17. Circular Flow Models

18. Circular Flow Models

19. Private sector
Businesses
Private sector

20. Circular Flow Models

21. Private sector-resources market Private sector-stores
Goods and services
Finished products
revenue
payments
Services, wages
Services, revenue
Labor, taxes
Goods, services, taxes
Public sector
Wages, salary
Employment, resources
Skills, resources
Labor, resources

24. Costs-money going out
Total Fixed Costs (rent, electric, insurance, water, franchise fees, labor salaries)
Total Variable Costs (labor wages, advertizing, resources, office supplies, packaging, mail)
Total Cost (tc=tfc+tvc)

25. Revenue –money coming in
(income, receipts, purchase prices, total revenue)

26. Benefit (profit, total revenue minus total costs) (p=tr-tc)

27. Marginal Cost
extra cost for producing one more
Marginal Revenue
Extra revenue for selling one more

28. extra profit for producing and selling 1 more
Marginal Benefit
extra profit for producing and selling 1 more
Profit maximization point
MC=MB MB

29. 1.00
.90
.80
.70
.60
.50
.40
.30
.20
.10
.00 MC
+.87
-.87
+.77
-.77
+.63
-.63
+.50 P
-.50
-.38
+.38
-.25
+.25
-.13
+.13 MB
+.74
+.52
+.25
+-0
-.25
-.52
-.74 Q

30. Continuum of Economic Systems
Utopia
Mixed Economies
The Jungle
Communism
Capitalism
North Korea
China
Sweden
Canada
USA
No pure example
Exists in nature
No pure example
Exists in nature
Degrees of Socialism
Take from one group, give to another
*You have two cows
*The government takes your cows and gives you some milk
*You have two cows
*The government takes one of your
cows and gives it to a person with no cows
*You have two cows. *You sell one and buy a bull.
*Your herd multiplies
*You sell them and retire.

31. Adam Smith The Invisible Hand Laissez-Faire Father of Capitalism
The Wealth of Nations, 1776
The Invisible Hand
Laissez-Faire

32. Karl Marx Proletariat Bourgeoisie Revolution Father of Communism
The Communist Manifesto, 1848 and Das Kapital, 1867
Proletariat
Bourgeoisie
Revolution

33. Elements of the Capitalist Free Market Economy
Capitalism (private ownership, profit)
Free Enterprise (freedom from government)
Market economy (voluntary exchanges)
Productivity
Specialization
Division of Labor
Human Capital
Economic Interdependence

34. Capitalism
Private ownership of property and the factors of production

35. Free Enterprise
The right of businesses and individuals to conduct their activities with minimal government interference.

36. Productivity
Productivity is the measure of the amount of output produced by a given amount of input.

37. Specialization
Specialization is when businesses, people, and countries concentrate on a particular set of goods and services.
Specialization improves productivity.

38. Division of Labor
The breaking down of a job into separate, smaller tasks performed by different workers.
Division of labor makes use of differences in skills and abilities.

39. Human Capital
The sum of the skills, abilities, and motivations of people.

40. Economic Interdependence
All parts of an economy are connected and dependent on each other to provide goods and services.