2. Unit 1: Basic Economic Concepts
“Econ, Econ”
Econ

3. Economic Terminology Utility = SATISFACTION Marginal = ADDITIONAL
Allocate =
DISTRIBUTE

4. What’s the price? vs. How much does it cost?
Scarcity vs. Shortages
Scarcity occurs at all times for all goods.
Shortages occur when producers will not or cannot offer goods or services at current prices.
Shortages are temporary.
Price vs. Cost
What’s the price? vs. How much does it cost?
Price= Amount buyer (or consumer) pays
Cost= Amount seller pays to produce a good
Investment
Investment= the money spent by BUSINESSES to improve their production
Ex: $1,000 new computer, $1 Million new factory

5. Goods vs. Services Goods Services
Physical objects that satisfy needs and wants
Actions or activities that one person performs for another
Consumer Goods
Capital Goods
Created for direct consumption
Created for indirect consumption; used to make consumer goods
Eg. teaching, cleaning, cooking
Eg. pizza, toilet paper
Eg. oven, knives, blenders

6.  Cost  Accountants Economists Only look at EXPLICIT COSTS
Look at the EXPLICIT COSTS and the IMPLICIT COSTS
Implicit costs are the opportunity costs such as forgone time and forgone income.
Explicit costs are the traditional “out-of pocket costs” of decision making.
Going to Disneyland
Peyton Manning leaves the NFL to open a taco shop.

7.  Profit  Economic Profit Normal Profit
The total revenue minus the total opportunity cost.
is often called the break-even point.
It is the profit where all the costs of your business, including the salary of the CEO, are covered.
Similar to accounting profit but smaller because it reflects the total opportunity costs (both explicit and implicit)