1. Unit 1 - Intro to Economics
What is economics?

2. Intro to Econ
A. Economics- the study of human efforts to satisfy unlimited wants and needs.
- Economics is a social science that deals with people and how they deal
with scarcity.
B. Scarcity- not having enough resources to produce everything people want.
1. Scarcity is the most fundamental economic problem.
2. There is no such thing as a free lunch- everything involves some
time, money, or resources.

3. C. Three basic economic questions
1. What to Produce- food vs. shelter vs. defense

4. C. Three basic economic questions
1. What to Produce- food vs. shelter vs. defense
2. How to Produce- factories vs. hand made

5. C. Three basic economic questions
1. What to Produce- food vs. shelter vs. defense
2. How to Produce- factories vs. hand made
3. For whom to Produce- who is your target audience? how did you decide?

6. D. Factors of production
1. Land - Natural resources including forest, fields, minerals, water, etc.
2. Capital – tools and equipment used to make goods and services.
Financial capital- money used to buy tools and equipment for production.
3. Labor- people to do the work. Can change in time (growth, immigration, war)
4. Entrepreneurs- driving force of the economy. Take risks to gain profit

7. E. Economic Systems
1. Traditional- economic activity based on habit or custom

8. E. Economic Systems
1. Traditional- economic activity based on habit or custom
2. Command- central authority decides how to answer the economic questions.

9. E. Economic Systems
1. Traditional- economic activity based on habit or custom
2. Command- central authority decides how to answer the economic questions.
3. Market- people are free to act in their own self interest

10. E. Economic Systems
1. Traditional- economic activity based on habit or custom
2. Command- central authority decides how to answer the economic questions.
3. Market- people are free to act in their own self interest
4. Mixed- combination of any of the above. Most countries are mixed including
the US.

11. F. Opportunity Costs
1. Trade off- alternatives, if you can’t have everything you must prioritize.
2. Opportunity Cost- The cost of your next best alternative, including money, time, and resources when a decision is made.
3. Production Possibilities Curve- diagram showing combos of goods and services that and economy can produce. Use it to compare OC.

12. Production Possibility Curve

13. G. Needs and Wants
1. Need- basic requirements for survival - ex. ____________________________.
2. Want- way of expressing a need -
ex. ______________________________.

14. H. Goods, Services, and Consumers
1. Goods- tangible products, things you can see or touch
a. consumer goods - final use is by the consumer
b. capital goods - used to produce other goods and services
c. durable goods - good that lasts more than 3 years under normal use

15. H. Goods, Services, and Consumers
2. Services- work performed for someone else.
Ex.______________________ - fastest growing part of economy
3. Consumers- people to use the goods and services
a. Consumption- process of using goods and services
b. Conspicuous consumption - use of a good or services to impress others

16. I. Money - anything used as …
1. Medium of Exchange- is it accepted?
2. Standard of Value - how is the worth determined?
3. Store of value - does it hold its value or will it need converted?
- Characteristics of Money- Portable, Divisible, Durable, Stable, Intrinsic Value.
- Fiat money - money that has value because the gov’t says so
- Currency - coins and paper bills used as money

17. J. Utility and Value
1. Utility- the capacity to be useful to someone. Should vary person to person
2. Value- scarcity and utility together create value
3. Paradox of Value - why are some things we need very cheap or worth nothing (water) and other things we don’t need very expensive (diamond).

18. K. Circular Flow Diagram
1. Market- location or other mechanism that allow buyers and sellers to deal
a. Product Market - producers offer G&S for sale for money
b. Factor Market - resources are offered for sale for money

19. Circular Flow

20. L. US Economic Goals
Freedom -- Choice of occupation, employer, use of money, etc.
Efficiency -- attempt to use resources wisely.
Equity -- illegal to discriminate on age, sex, race, etc.
Security -- disability and retirement income to those who need it.
Full Employment -- 5% or less unemployment, but not 0%.
Price Stability -- control inflation, so people know what to expect.
Growth -- necessary because of grown in population.
Trade Offs -- increased security and equity increase the unemployment rate.

21. M. Capitalism and Free Enterprise
Capitalism -- system where private citizens own the factors of production.
Role of Entrepreneur -- employees better pay, consumers better products, governments more economic activity.
Role of Consumer -- Customer is always right.
Role of Government -- Protector, Provider, Regulator, Promoter.
Free Enterprise
Economic Freedom -- Everyone has choices.
Voluntary Exchange -- Free to buy and sell from/to anyone.
Private Property -- Control your possessions as you wish.
Profit Motive -- improve materials and well being by taking risk.