1. Economics
The study of decision-making and the use of limited resources in an attempt to fulfill unlimited wants.

2. Scarcity
Exists whenever there is not enough of a resource to fulfill our wants.
Limited and Desirable
What isn’t scarce??????????

3. NOTHING IS FREE!!! Every choice requires a trade-off
Explicit and/or Implicit Costs

4. Opportunity Cost The value of the best forgone alternative.
What one gives up when deciding to do one thing over another.

5. Economic Models
Simplified constructs used to simulate reality

6. Sunk Cost already incurred and cannot be recovered
allowing sunk cost to influence decisions defies “rational choice”

7. Rational Choice Theory
People act in self-interest
People always choose the option that will bring the greatest perceived benefit or satisfaction

8. Incentives Rewards and penalties that influence our choices.
“Carrots” and “Sticks”

9. 3 Economic Questions

10. 3 Economic Questions
_______________ to produce

11. What?

12. What?

13. What?
Factors of Production
Land, Labor, Capital, Entrepreneurship

14. 3 Economic Questions
_______________ to produce

15. How to produce? Factors of Production
Land, Labor, Capital, Entrepreneurship

16. Grab a Computer

17. 3 Economic Questions
WHAT
HOW to produce
FOR WHOM

18. 3 Economic Questions WHAT HOW to produce FOR WHOM
Who answers these questions?

19. 3 Economic Questions
COMMAND MARKET

20. Market or Command North Korea United States? free enterprise
capitalism
consumer sovereignty
competition
more efficient
better quality
profit motive
government control
government ownership
no motivation
no private property rights
prices determined by s and d
lack economic freedom

21. MARKET v. COMMAND
MIXED
COMMAND MARKET

22. Market v. Command Economies

23. Command Elements of US Economy

24. Micro versus Macro Positive versus Normative

25. Production Possibilities FrontierA B C

26. Advantage and Specialization
Absolute Advantage- best at production
Comparative Advantage- produces at the lowest opportunity cost
Specialization- based on comparative advantage

29. Circular Flow Model
flow of expenditures and incomes

30. Circular Flow to Know Shows flow of expenditures and incomes
Market- where buyers and seller meet
Factors of Production- L,L,C,E
Goods/Product Market v. Factors Market
Largest Sector based on GDP

31. Major Topics Basic Terms Market v. Command PPF Comparative Advantage
Factors of Production
Circular Flow Model