1. Definition
Economics: The study of how society chooses to allocate its scarce resources in order to satisfy unlimited wants
Microeconomics: Branch of economics that studies decision-making by a single individual, household, firm, industry or level of government.
Macroeconomics: Branch of economics that studies decision-making for the economy as a whole

2. Modified for East High - Period 5!
Economics
Money, Power, Respect By
Ms. C. Ibena-Berry
Modified for East High - Period 5!

3. Economics Outline for the semester Materials Requirements Ticket out
Song just for you….
”Money, Power, Respect

4. Problem of Scarcity
Scarcity: The condition in which human wants are forever greater than the available supply of time, goods, and resources.
3 Economic Questions
What will be Produced?
How will it be Produced?
For whom will it be produced?

5. Positive vs. Normative
Positive Economics: An analysis limited to statements that are verifiable
Normative Economics: An analysis based on value judgment

6. Scarce Economic Resources
Factors of Production (FOP): The resources used to create goods and services
Land: Any natural resource provided by nature.
Labor: The mental and physical capacity of workers to produce goods and services.
Capital: Any physical man-made good used to produce other goods.
Entrepreneurship: Vision, skills, and risk-taking needed to create and run a business.

7. Trade-off: Any alternative that could be chosen
Opportunity Cost
Trade-off: Any alternative that could be chosen
Opportunity Cost: The best alternative sacrificed for a chosen alternative

8. The Invisible Hand Theory
Adam Smith: Scottish Economist ( )
The Invisible Hand Theory
“It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest

9. Guns PPC Butter Production Possibilities Curve — Marginal Analysis A20 40 60 80
100
120
140
160
Guns
Butter
PPC
Production Possibilities Curve
A curve that shows the maximum combinations of two outputs that an economy can produce, given available LLC. B Z
Unattainable point U
Underutilization C
Assumptions about the PPC
Fixed Resources
Fully Employed Resources
Technology Unchanged D

10. Production Possibilities Curve — Law of Increasing Opportunity cost20 40 60 80
100
120
140
160
Guns
Butter A B C D
PPC
Marginal Analysis
An examination of the effects of additions to or subtractions from a current situation.
The Law of Increasing Opportunity Costs
The principle that the opportunity cost increases as production of one output expands.
This is responsible for the “bowed shape” of the PPC.
Reasoning
not all workers are equally suited to producing one good , compared to another.
as we shift production levels of butter, we gradually tap into the best gun-making resources

11. Movements along the PPC
Production Possibilities Curve — Movements and Shifts 20 40 60 80
100
120
140
160
Guns
Butter
PPC2 B C
Shifts in the PPC
Changes (increases) in the levels of a country’s LLC will cause the PPC to shift from PPC1 to PPC2 A
PPC1
Movements along the PPC
Changes in the needs and wants cause a country to choose a different point along an existing PPC