Chapter 1: The Fundamentals of Economics

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Chapter 1 The Fundamentals of Economics

• 19 total slides
• Start with Butcher video

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Whats it all about?

• The study of how societies use scarce resources
  to produce valuable commodities and distribute
  them to different people
• What does that mean?
• Pull out the only two words that matterscarce
  and use

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Foundation

• Economics is the study of choices we make with
  our limited resources
• Why do we have to choose?
• How many of us can have all we want?
• What about Bill Gates, the worlds second
  wealthiest man?
• Answer None of uswe are all forced to make
  choices concerning out limited resources
• When making those choices we try to be as
  efficient as we can since that results in us
  getting more

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What happened to Bill?

• Anyone know who replaced Bill Gates at the top of
  the worlds wealthiest people list?
• Carlos Slim

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The Twin Themes

• Economics is about making the best use of your
  limited resources
• The two most important ideas, or twin themes,
  then become SCARCITY and EFFICIENCY

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The Two Continue

• Scarcity means that everything is of limited
  quantity, or at least all of the desirable
  economic resources
• Efficiency tells us that since what we have is
  limited you want to make the best use of it

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Been around a long time

• Economic thought has always existed whether we
  realize it or not
• The formal study began in 1776 when Adam Smith
  wrote A Wealth of Nations
• Macro didnt come until later when John Maynard
  Keynes introduced the idea of govt intervention
  during the Great Depression

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All those years for one idea

• Essentially all of it revolves around the same
  principle problem, what do we do with our limited
  resources?
• Question could be broken down further intro three
  smaller thoughts

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3 Key Questions

• 1. What should we make?
• 2. How should we make it?
• 3. For whom should it be made?
• It doesnt matter who or where you are every
  society has to answer these three questionsbut
  that doesnt mean the same person answers them
  everywhere

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Different Systems

• Essentially it comes down to whether the
  individuals or govt have the control
• In a market or capitalist economy the people
  themselves answer the questions
• In a command or centrally planned economy the
  power resides with the govt

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Which one has proven right?

• Based on your knowledge of global economies,
  which of these two has consistently proven to be
  more effective?
• Technically today all economies are considered
  mixed since they all have a combination of each

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Doesnt matter who

• Regardless of who is in control, its still about
  the same things.the FACTORS OF
  PRODUCTION!!!
• POP QUIZ WHAT ARE THEY? GIVE EXAMPLES OF EACH.

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But one more

• We should at least vaguely remember the land,
  labor, and capital (both types)
• We can also now add a fourth, ENTREPRENEURIAL
  ABILITY
• Its almost like our human capital, but with a
  greater focus on combining factors in new ways

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A few more old friends

• What else do we remember?
• guns or butter
• Govt decision on spending money on the military
  or consumer goods
• PPF
• Graph showing the max possible production
  (EXTREMELY IMPORTANT)

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On the Possibilities Frontier

• video

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PPF

• PICTURE OF ONE

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Maximus the Gladiator

• The line itself shows the MAX POSSIBLE PRODUCTION
  GIVEN THE EXISTING TECHNOLOGY AND RESOURCES
• It is impossible to produce more, unless those
  things change allowing the curve itself to shift
  out
• Can use the graph to analyze cost, efficiency,
  and some other stuff

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Part 2

• video

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Overview

• Very, very light chapter
• A few general ideas but nothing really
  spectacular
• Remember that the key will be keeping up
• Dont really have a choiceyou simply have to
• Resources are available so make sure you get what
  you personally need