1. What is Economics?

2. What is Economics?
Goods and Services are tangible and intangible things that satisfy people’s wants and desires.
Goods: Cars, Computers, Ipods, Fruit, Cell phones
Services: Doctor, Teacher, Accountant, Librarian

3. If you could have anything in the world… what would you want?

4. WE WANT EVERYTHING!

5. SOCIETY HAS VIRTUALLY UNLIMITED WANTS...
THE FOUNDATION OF ECONOMICS
SOCIETY HAS VIRTUALLY UNLIMITED WANTS...

6. Luxuries . V.
NECESSITIES
Food
Clothing
Shelter

7. What is the definition of Economics?
“Economics is the study o f how individuals and society, experiencing virtually limitless wants, chooses to allocate its scarce resources to satisfy those wants.”

8. So what dilemma does this create?
We have unlimited wants, and scarce resources.
What causes this dilemma?
Scarcity- the idea that our unlimited wants out weigh the resources available which makes all levels of society make decisions.

9. Simply put… Economics is:
What is scarce?
Everything is scarce because our wants ALWAYS exceed the limited resources available.
Simply put… Economics is:
Economics=Scarcity
And the definition of Scarcity is
Scarcity = wants > availability of resources

10. Dealing With Scarcity - When There Is Not
Enough For Everyone - Someone Suffers

11. When decisions are made there is always a cost involved.
Opportunity Cost= the value of what you must give up when you make a particular choice.
Example: Going to college, what are you giving up?

12. Four Categories of Scarce resources:
Land
Raw Materials, Natural Resources, Air, Water
Labor (Human Capital)
Human knowledge, Skills, Workers willing and able to perform a job
Physical Capital
Machines, Factories, Equipment
Entrepreneurship
Someone willing to take a risk and start a business

13. Economic Systems

14. Why do we have Economic Systems?
Survival for any society depends on its ability to provide food, clothing, and shelter for its people.
The Economic System is the organized way a society provides for the wants and needs of its people.

15. Three Economic Systems
Traditional Economy
Command Economy
Market Economy

16. Traditional Economy
Economic activity is based on ritual, habit and custom

17. Strengths of Traditional Economies
Everyone knows their role
Little uncertainty over what to produce or how to produce
Life is generally stable, predictable, and continuous

18. Weaknesses of Traditional Economies
Tends to discourage new ideas
Lack of progress leads to lower standard of living

19. Command Economy Central authority makes most economic decisions
Economic decisions are made at the top and the people are expected to go along with choices their leaders make

20. Strengths of Command Economies
Change direction drastically in a relatively short time (The USSR went from an agrarian to industrial nation in a very short time)

21. Weaknesses of Command Economy
Not designed to meet the wants and needs of individuals
Lack of incentives to work hard leads to unexpected results

22. Market Economy
People and firms act in their own best interest to answer economic questions

23. Market Economy
Markets allow buyers and sellers to come together in order to exchange goods and services

24. Strengths Freedom exists for everyone
Small degree of governmental influence
Variety of goods and services
High consumer satisfaction

25. Weaknesses The primary weakness is deciding for whom to produce
The young, sick and old would have difficulty in a pure market environment
Markets sometimes fail
Competition (monopolies may develop)
Resource mobility (resources are sometimes hindered from moving about)
Availability of information (producers often have more information than do consumers, which gives them advantage)