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INTRO TO ECONOMICS
What is economics??
Efficient use of scarce resources Study of how individuals and
society, experiencing limitless wants, choose to allocate its scarce resources.
What do people Want/Desire??
EVERYTHING! ALWAYS!
Economic Questions
Scarcity= Limited resources v unlimited wants
3 economic questions1. What to produce?2. How to produce it?3. For whom?
Why Study Economics?
We have unlimited wants in a world of scarce resources
Econ focuses on the best use of scarce resources Scarcity causes Opportunity Costs:
Opportunity cost Forgo something to get the other “Cost of doing business” Sleep v. study
5 Factors of Production
1. Land: All natural resources
2. Labor: Human work
3. Capital: All human-made means of production
4. Technology: Innovation and Design
5. Entrepreneurs: Risk takers, business owners, inventors, etc.
Economic Systems
What are “economic systems” Institutions who determine, who,
what, where to produce
1. Traditional System: Solves the economic problems
through custom and tradition What to Produce: Past habits How to produce: not efficient
—old habits For Whom?: Strict rules/social
classes/communally
2. Command System
Solves economic problems through government authority What to produce: Determined
by Gov. & authority How to produce: Determined
by Gov. & Authority For Whom: Determined by
Gov. & Authority
Examples: Cuba, Former Soviet Union, North Korea
3. Market System
Solves economic problem answered through Supply and Demand
**System is driven by making profits** What to Produce: What
makes $$ How: What ever
maximizes $$ For Whom: Whoever
wants to pay
Capitalism
System where the Individual not the government makes decisions
Basic Freedoms of Capitalism
1. Free enterprise: Freedom to start and operate own business
2. Private Property: Right to own
3. Freedom of Choice—Choose between goods and services