Post on 03-Jan-2016
transcript
Section 1
Wants, Needs, and Choices
The basic problem in economics is how to satisfy unlimited wants with limited resources.
Section 1
Wants, Needs, and Choices (cont.)
• Economics the study of how people choose ways to use limited resources to fulfill their wants
• Economics is divided into two parts:
– Microeconomics –dealing with behavior & decision making by small units (individuals & firms)
– Macroeconomics -- dealing with the economy as a whole and decision making by large units (governments)
Section 1
Wants, Needs, and Choices (cont.)
• To economists, anything other than what people need for basic survival is a want.
• Wants & Needs
• Need (food, clothing & shelter)
• Want – everything else
• How societies choose to use their resources is the focus of economics.
Section 1
The Problem of Scarcity
Scarcity exists because people’s incomes and time are limited.
Section 1
The Problem of Scarcity (cont.)
• Choices arise because everything that exists is limited. At the same time, people have competing uses for the available resources resulting in scarcity.
• scarcity: basic economic problem that results from a combination of limited resources and unlimited wants
• Shortages are temporary, whereas scarcity is permanent.
Section 1
The Factors of Production
Scarce resources require choices about uses of the factors of production: land, labor, capital, and entrepreneurship.
Section 1
The Factors of Production (cont.)
• When economists talk about scarce resources, they are referring to the factors of production:
• Create a foldable
– Land
– Labor
– Capital
– Entrepreneurship
– Land: all natural resources, surface land & water (land, water, fish, animals, trees, and mineral deposits)
– Labor : (human resources) the work people do to produce goods and services.
– goods: tangible objects that you can touch
– services: actions that can satisfy people’s wants or needs
The Factors of Production (cont.)
– Capital: previously manufactured goods used to make other goods and services (machines, buildings & tools)
– When combined with land and labor, increases the value of all three factors and increases productivity
– Productivity the amount of output (goods and services) that results from a given level of inputs (land, labor, capital, and entrepreneurship)
The Factors of Production (cont.)
Section 1
The Factors of Production (cont.)
– Technology (sometimes added to the list of factors of production) uses science to more efficiently use land, labor and capital.
– Entrepreneurship is individuals taking risks to start new businesses.
• How much of each of these factors of production an individual has determines his or her wealth.
Section 2
Trade-Offs (cont.)
• The economic choices people make involve trade-offs (sacrificing one good or service to purchase or produce another)
• The cost of a trade-off is what you give up in order to get or do something else.
• Economists call the value of the next best alternative or trade-off, opportunity cost (2nd choice)
View: What’s the Difference Between a Trade-Off and an Opportunity Cost?
Section 2
Production Possibilities Curve (cont.)
• A production possibilities curve is a graph showing the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time
• Helps determine how much of each item to produce, which reveals trade-offs and opportunity costs
View: A Production Possibilities Curve
View: Production Possibilities—Guns vs. Butter
Section 3
Economic Models (cont.)
• Economists one’s who study how individuals, businesses and nations use their limited resources.
• Economy is the production and distribution of goods and services in a society
• Economics study of how people make choices about ways to use limited resources to fulfill unlimited wants