What is Economics?

The way a community or society produces and exchanges goods

and services they want.

Economics isn’t about MONEY; it is about choices we make.

Economics doesn’t tell you what is right or wrong.

What is voluntary exchange and where does it occur? Market economy is the primary means of

organizing and coordinating production of goods and services. Retail store Stock market Internet Restaurants Pizza delivery Babysitting Plumber, electrician, mechanic

4 basic resources are needed to produce goods and services.

1. Natural resources1. Resources in the natural environment

which can be used for the production of goods and services. (it is not considered a resource if it isn’t used for production)

2. Can be increased by discovery

Mineral Oil and Gas Water Wind

Timber Soil Sea life

2. Human resources•Acquired skills and abilities workers bring to a company.

3. Capital resources•Resources must have been produced•Resources can be used to produce other goods and services

Examples:

buildings machines computers

4. Entrepreneurship Willing to take risks Innovative thinkers Start business of the future

Ex: Henry Ford, Jobs, Facebook, google founders

What is scarcity? Inability to satisfy all wants(it’s hard to identify “wants” and “needs”Needs can be different for everyone.)

• Is the amount of resources available in relation to people’s wants• Relationship between the amount of something we want and the amount that is available.

A CONDITION WHICH FORCES US TO CHOOSE.

What is Opportunity Cost? The best alternative given up The most highly valued sacrificed alternative The thing you gave up to have something

else Next best thing, or forgone alternative

You may have many alternative BUT only one is your opportunity cost.

WE ALWAYS MAKE THE BEST CHOICE AT THE TIME WE MAKE A CHOICE.

What determines opportunity costs? Alternatives

Taste and value, preferences

Rules of the game

What is trade off? Give up some of one thing to have more

of something else.

A choice between alternatives that reveals the opportunity cost of selecting one alternative over the other.Sleeping School HomeworkHanging out

Marginal Cost and Marginal Benefits Economists often focus on the additional or

extra costs of benefits of a choice.

Marginal cost is the increase in total cost that results from producing and additional unit.

Marginal benefit is the increase on total benefit that results from producing, purchasing, or consuming an additional unit.

Costs and Price Cost is the value a seller must give up

to produce something Are born by people Are the results of actions-things have no

cost Are always in the future (costs in the past

have already occurred)• Price is the monetary value we must pay to

buy something

How do we make these choices?

MB greater than or equal to DO IT!

MB less than DO LESS!

What are the basic economic choices facing ALL societies? WHAT

HOW

WHO