1. Economics

2. What is Economics?
The study of choices

3. Micro vs. Macro Economics
Macro is the study of the national economy as a whole = we study economic output, inflation and unemployment of the nation.
Micro is the study of individuals, firms and industries = we study how prices and output are determined for a firm or industry

4. What is Economics? The study of choices The role of wants
there are unlimited wants

5. What is Economics? The study of choices The role of wants
there are unlimited wants
The role of scarcity
there are limited resources
Shortage vs. Scarcity

6. What is Economics? The study of choices The role of wants
there are unlimited wants
The role of scarcity
there are limited resources
The role of opportunity costs
choosing how to use our resources has consequences

7. The opportunity cost is the next best alternative
Opportunity Costs =
Forgoing one product or opportunity for another
The opportunity cost is
the next best alternative

8. Opportunity Costs Opportunity cost are measured in:
time - a basketball game vs. movies

9. Opportunity Costs Opportunity cost are measured in:
time - a basketball game vs. movies
goods - new shoes vs. compact disc

10. Opportunity Costs Opportunity costs are measured in:
time - a basketball game vs. movies
goods - new shoes vs. compact disc
resources - wilderness vs. minerals needed for production

11. Opportunity Costs Your Pencil or Pen
Decisions on how to use our resources, time and money are based on how much utility that a product or service gives us
Utility = usefulness of a product or service or the satisfaction you receive from a product or service
What gives you utility right now?
Your Pencil or Pen

12. Opportunity Costs Utility varies depending on needs
for example your downhill skis don’t give you much utility in the summer months

13. Opportunity Costs Utility varies depending on needs
for example your downhill skis don’t give you much utility in the summer months
OC varies from one person to another
Skis- no OC for non-skier
OC changes over time –
food and level of hunger

14. Economic Good vs. Economic Service
Good = tangible, physical object
Service = intangible, actions that one person performs for another

15. FACTORS OF PRODUCTION
ALL RESOURCES THAT ARE USED TO MAKE GOODS AND SERVICES
LAND
LABOR
CAPITAL

16. LAND NOT ONLY REAL ESTATE
ALL NATURAL RESOURCES USED TO PRODUCE GOODS AND SERVICES

17. LABOR
WORKERS – EFFORT A PERSON DEVOTES TO A TASK FOR WHICH THAT PERSON IS PAID
PHYSICAL EFFORT
MENTAL EFFORT

18. PHYSICAL CAPITAL HUMAN MADE OBJECTS BUILDINGS AND TOOLS
PHYSICAL CAPITAL = GREATER PRODUCTIVITY

19. HUMAN CAPITAL
KNOWLEDGE AND SKILL A WORKER GAINS THROUGH EDUCATION AND EXPERIENCE

20. PUTTING IT ALL TOGETHER
WHO DECIDES HOW TO COMBINE LAND, LABOR, AND CAPITAL RESOURCES?
ENTREPRENEURS
JOHN D. ROCKEFELLER
ANDREW CARNEGIE
SAM WALTON
RAY KROC
BILL GATES