1. Economics
What is Economics?

2. What is Economics?
Study of how people meet their needs by making, distributing, and using goods and services.
Peoples needs are met by using productive resources
natural resources, human resources, capital goods, and entrepreneurship
NOT spread evenly around the world

3. Goods and Services Goods- objects that people make and use.
Services- activities people do for others.

5. The Problem of Scarcity
Inability of our existing resources to meet our unlimited wants
Think of an example for the problem of scarcity.
Everyone may want a new home but there are not enough materials, land, or labor available to build new homes for everyone.

6. Opportunity Cost
When we choose to use our resources to satisfy a particular need, we give up the chance to use those same resources to satisfy other needs.
“Trade-off” occurs whenever we give up one thing for another
Every economic decision using resources involves a trade-off, known as the opportunity cost of that decision.
The opportunity cost of a decision is the next best choice that was given up—true cost of a decision.
Give an example of opportunity cost.
Money to buy stereo, you lose the opportunity to use that same money to buy a computer
Government spends its resources to equip its army, fewer resources are available for other purposes

7. Select one economic decision you made recently and its opportunity cost

8. Every society has scarce resources to meet the unlimited wants of its members, every society must answer these questions.

9. 3 Basic Economic Questions
Societies answer these questions in different ways through the type of economic system instilled.
Traditional-produce what ancestors produced, using same traditional methods, and then divide it as their ancestors did
Command-ruler tells everyone what to do and decides who gets what—communism or dictatorship
Free Market or Mixed Market-people are free to produce what they think they can sell to others, while others are free to buy whatever they can afford. Government does regulate some business.

10. Give examples of the types of economic systems.
Traditional
People grow own food and make their own goods, barter or exchange of goods without the use of money/currency.
Command
Communist countries of Cuba and North Korea are close to it.
Market
United States, free to buy and sell what they wish, prices determined by supply and demand, sometimes called capitalism.

11. Specialization and Trade
What is specialization?
Making of only some types of goods or services
How does it affect trade?
It increases trade because regions rarely produce everything they need. They depend on one another for many goods and services.

12. What causes specialization?
Productive resources are NOT spread evenly around the world
Different parts of the world have different
Climates
Soil
Landforms
Bodies of water
Mineral resources
Training
Education
Experience
Therefore, different regions make certain types of goods based on the productive resources available.

13. Advantages of Specialization
Regions can take advantage of their own productive resources
As a result, a region can produce a good or service at the lowest opportunity cost.
Producers become more skilled
Producers learn how to make goods faster and more efficiently through the use of special tools and training.

14. How Specialization Encourages Trade
Because regions specialize, they rarely produce everything they need. Regions then rely on one another to supply many goods and services.
Trade-merchants bring goods form one place to another, and then sell them in markets
Imports:
Goods from foreign countries brought into a country for sale.
Exports:
Goods and services sold from one country to other countries.

15. How Supply and Demand Help Set Prices
Demand– how much people want or need a product. Factors influencing demand:
How well does the product satisfy people’s needs?
Are there alternative products that satisfy the same needs?
Is the product something people must have, or can they do without?
Is it something everyone else has?
Will having the product give the owner more power or status?
Stronger the demand, the more expensive the product
Buyer willing to pay more for quality, usefulness, and value.

16. How Supply and Demand Help Set Prices
Supply– how much of a product is available for sale
Small supply of a product is available, then it may be more expensive
People will compete to buy it

17. How Supply and Demand Help Set Prices
The Interaction of Supply and Demand
PRICES
HIGH DEMAND/ SHORT SUPPLY
Interaction of these forces affects the price that a buyer is willing to pay and what a merchant is willing to accept
PRICES
LOW DEMAND/ LARGE SUPPLY

18. Supply and Demand Create World Trade
The need to exchange goods led to the development of trade and distinct trade patterns between peoples very early in human history.
Reliance of one country on the resources, goods, and services of another country creates INTERDEPENDENCE
Interdependence increases globalization—process through which countries are increasingly linked to each other through culture and trade