Economic Questions

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Economic Questions
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I) Why Economics?
Why do we need Economics? Why does Economics
exist? What is Economics?
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a) Scarcity

• The world is composed of finite (limited)
  resources.
• Theres not enough of each resource to
  accommodate all people

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b) Unlimited Wants

• Human beings are by nature insatiable.
• We are not satisfied by sustenance (needs).
• We often want more than we need to survive
  (greed).

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c) Choices

• Because people must compete over scarce
  resources, choice necessarily follows.
• People must choose between different wants.

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d) Allocation

• Economics is the study of how society allocates
  (distributes) its scarce resources among its
  unlimited wants and needs.

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II) Costs Benefits
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a) Opportunity Cost

• The value of any alternative that you must give
  up.
• What you lose when you choose.

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b) Opportunity Benefit

• What is gained by making a particular choice.
• What you gain when you choose.

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III) Three Economic Questions
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a) What to Produce?

• 1) Limited resources means that choices must be
  made
• 2) Must weigh opportunity costs against
  opportunity benefits.

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b) How to Produce?

• 1) Labor intensive vs. capital intensive.
• 2) Must weigh opportunity costs against
  opportunity benefits

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c) For whom to produce

• 1) How will goods services be allocated among
  people.
• 2) Will it be according to ability (market), or
  by need (command).

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IV) Levels of Economics
There are two different levels

of
Economics.
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a) Microeconomics

• 1) Economics on a personal or individual level.
• 2) What would this firm need to do to increase
  its profits?

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b) Macroeconomics

• 1) Economics on a national or global scale.
• 2) What effect does NAFTA have on international
  trade?