Economics Is… Definition The study of how people seek to satisfy their needs and wants by making...
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Transcript of Economics Is… Definition The study of how people seek to satisfy their needs and wants by making...
Economics
Is… Definition
The study of how people seek to satisfy their needs and wants by making choices
Needs
Food Water Shelter Air Love Clothing Transportation Health Care Education
Wants
Car Job Technology Bigger Better Brighter Newer
Scarcity
Limited quantities of a resource to meet unlimited wants and needs
WE MUST CHOOSE
Choices
Child Adolescent Adult Rich Poor
Allocation
To set aside resources for a specific function Macro Micro
Opportunity Cost/Benefit
The most desirable alternative given up as the result of a decision
The desired gain of making a decision
Opportunity Cost/Benefit
Benefit Cost
New Shoes
Speeding
Fast food
Sports
Part-time job
Lease a car
College Ed.
Thinking at the Margin
Deciding whether to do or use one more unit of some resource
Production Possibility Frontier
A
B
Efficiency
Using resources to maximize the production of goods and services
Underutilization
Using fewer resources than an economy is capable of using
Vacation Destination
You will now participate in a “real life” decision-making simulation. Pretend you have saved $1000 for a Spring Break fling with your friends. Use your best allocation of your resources to get the most “bang for the buck.” Shop with 5 different travel agencies to create the best package. Think at the Margin.
Scarcity
Definition Micro Macro
VacationDestinationSimulation
Trade-off
An alternative sacrificed when a decision is made Your family The USA
Specialization
The concentration of the productive efforts on a limited number of activities Your family The USA
Key Economic Questions
All societies must answer… What to produce? How to produce? For whom to produce?
“Poop to Profits”
Economic Systems
Free Market – prices, distribution, wages, unhindered by government control
Free Enterprise (USA) Socialist (China) Command – production and
investment are regulated by central authority
Reflections
Reflect on who makes the decisions about the use of resources, like how much crude oil will be converted to gasoline to be used in your car.
How could a Free Market encourage people to use more renewable sources of energy?
How would a Command Economy get people to convert to renewable sources?
US Free Enterprise
The US free enterprise system emphasizes the economic goals: Efficiency Freedom Innovation
Consumer sovereignty dictates: Prices Quantities Quality
Self-interest
One’s own personal gain
GREED IS GOOD
Best classes, best assignment Motivates you to learn on your own
Try something new Work hard
Incentive
An expectation that encourages people to behave a certain way School rules Laws Taxes Sales Advertising
Competition
The struggle among producers for the dollars of consumers
Rational Ignorance Incentive make sense We don’t know, or choose not to care
Advertising Activity
Market
Arrangement that allows buyers and sellers to exchange things Factor Market Product Market
Production
Factors Land Labor Capital Entrepreneurship
Payments Rent Wages Interest Profits
- Combining factor resources to create final goods and services.
Consumption
Determinants Income Attitude Substitute Complement
Price Sales Used instead of Used together
- Use of final goods and services
Circular Flow Model
Firms Households
Factors:L,L,C
Payments:R,W,I
Goods & Services
PricesProduct Market
Factor Market