1. What is Economics?
How do economists study the ways people make decisions on how to use their time, money, and resources?

2. Economic Choices
Economics is the study of how people make decisions in a world of limited resources.
Responsible citizens make economic decisions everyday. We have to make these choices because we have limited resources.
Scarcity
- Scarcity: the fact that we do not have enough resources to satisfy everyone’s needs and wants
Needs vs. Wants

3. The Four Factors of Production
The 4 resources necessary to produce goods and services
1. Natural Resources: all of the “gifts of nature” that make production possible
2. Labor (workers): physical and mental efforts that people contribute to the production of goods and services
3. Capital/Capital Goods: tools, machinery, and goods used to make other things
4. Entrepreneurs: individuals who start new businesses, introduce new products, and improve management techniques

4. Making Economic Decisions
Trade Offs: the alternative you face if you decide to do one thing rather than another.
You face trade-offs in deciding how to spend your time and money. Society faces trade-offs in determining how to distribute scarce resources.
Opportunity Cost: is the item you did not choose and is the next best alternative to the thing you actually chose.

5. Production Possibilities Curve
The Production possibilities curves shows what things can possibly be produced by a business at a given time.
This model shows us that we are limited in the number of a certain good we can produce because of scarcity. When we choose to produce more of one good, we must give up production of the other.
“Guns vs. Butter” – do we invest more in defense or civilian goods?

6. Economic Systems
Traditional Economies: Decisions are made based on customs and traditions.
Capitalism (Market Economy): an economic system in which individuals have choice on how to use the Factors of Production (FoP). Buyers and sellers may freely interact with little government interference.
Command Economy (Communism): the government owns and decides how to use the FoP and makes all the decisions.
Socialism: an economic system where the community owns the FoP, and decisions are made through people working together for “The Common Good.”
Mixed: A mixture of any of the above economic systems.