1. INTRODUCTION TO ECONOMICS

2. But Mom, I NEED It!! What is the difference between a WANT and a NEED?
A need is something essential to survival; the basic necessities of life.
Ex. Air, Water, Food, Clothing, Shelter
A want is something that we desire, but is not essential for our survival; extras that make like more pleasant.
Ex. Cell Phones, Television, Cars, iPods
Because our resources are limited, people must often make choices between needs and wants.

3. What is Economics?
Economics - The study of how people choose to satisfy their needs and wants in a world of limited resources.
Microeconomics: The study of the behavior and decision making of individuals, families and businesses (small scale)
Macroeconomics: The study of the behavior and decision making trends of entire economies (large scale)

4. What is Scarcity?
Scarcity - A limited quantity of resources to meet unlimited needs and wants.
Scarcity ALWAYS exists because resources are always limited.
Scarcity v. Shortages
A shortage occurs when a good or service is unavailable
Shortages can be temporary or long-term and can be caused by price fluctuations, wars or drought.

5. Classifying Resources
The resources used to make all goods and services are called the factors of production. They are:
Land: All materials found in nature (natural resources).
Ex. Land, water, trees, coal, oil
Labor: The effort a person devotes to a task for which he/she is paid.
Ex. When you are paid an hourly wage for working, you are being paid for your labor.

6. Classifying Resources cont.
Capital - Any human made resource that is used to produce other goods and services.
There are two types of capital:
Physical Capital: Human made objects that can be used to create other goods and services
Ex. Buildings, equipment, tools
Human Capital: The knowledge and skills a person gains through education and experience

7. Making Decisions
Trade-Offs: An alternative that we sacrifice when we make a decision. All human decisions involve trade-offs.
Individuals
Businesses
Societies
Guns or Butter?

8. Opportunity Costs
Opportunity Cost: The most desirable alternative given up as the result of a decision. Your second choice.
Whenever we make a decision, we face an opportunity cost;

9. THINK ABOUT IT!
Explain the difference between an opportunity cost and a trade off.
Read pg. 19, “Safety at Any Cost?” and answer the questions at the bottom of the page.