1. Chapter 18
Section 1

2. What kind of government does China have?
Focus Question
What kind of government does China have?

3. Economic Choices
Economics is the study of how we make decisions in a world where resources are limited.
The world does not have enough production resources to satisfy our needs
Scarcity plays a factor in the amount of goods that we have
Economics is called the science of decision making
Wants vs. needs

4. Scarcity Needs- something that is required for survival
Water, food, clothing, shelter
Wants –something we like to have to make our lives more comfortable
Cars, vacations, TV
Scarcity means we have the resources necessary to produce all things we wish to have
We have to make choices
Have alternatives
Realistic expectations of what you can have

5. WHAT to produce? A choice about how to use resources.
Improving our military or building a mall

6. HOW to Produce How are we going to get goods Where to get goods
Take them or buy them
Where to get goods
Local or foreign

7. For WHOM to Produce
How will the goods be distributed?
Price system

8. Economic Models
Simplified representations of the real world are used to explain how the economy works
Predict what would happen in the economy if a particular event occurred
Based on assumptions
Models can be revised
Rely on Hypothesis

9. Making Economic Decisions
Section 2
Making Economic Decisions

10. Focus Question
What is Scarcity?

11. Trade Offs
Economic decisions should be simple if you follow a few rules
Scarcity forces people to make choices about how they will use their resources
Economic choice people make involved exchanging one good or service for another
Money for goods
Trade off-alternative you face if you decide to do one thing rather than another

12. Opportunity Costs Opportunity Costs Measures of Cost
Cost of the next best use of your time or money when you choose to do one thing, not another
Includes more than money
Time
Resources
Measures of Cost
Knowing how many things to make so you make money

13. Costs Fixed Costs Variable Costs Total Costs Marginal Costs
Expense that are the same no matter how many units are produced
Variable Costs
Expense that change with number of products produced
Wages and materials
Total Costs
Fixed and variable costs
Average total costs
Total cost/number produced
Marginal Costs
Extra or additional costs of producing one additional unit of output

14. Marginal Marginal revenue Marginal Benefit Cost Benefit Analysis
Change in total revenue
Marginal Benefit
Extra benefits
Cost Benefit Analysis
Compare marginal costs
Marginal benefits of a decision
If costs are greater than the benefits then they should be rejected

15. Section 3

16. Focus Question
What is Scarcity?

17. Your Economic Role You must be informed to be a good economic citizen
Know what your money can buy
We have a market economy
Supply, demand, and prices help people make decisions
The choices you make as a consumer affect the products business produce
The prices are also affected by the consumers

18. Stay Informed Have an awareness of the economy Gathering information
News, people, government reports

19. Incentives
Rewards offered to persuade people to make certain economic actions
Credit cards
Banks
Grants
Subsidies
Tax credit

20. Wise Choices Rational choices
Choosing the alternative that has the greatest value from amongst comparable goods