Introduction to Economics

1
Introduction to Economics

• The Economic Problem
• Opportunity Cost

2
The Economic Problem

• Unlimited Wants
• Scarce Resources Land, Labour, Capital
• Resource Use
• Choices

A wind farm.
3
The Economic Problem

• What goods and services should an economy
  produce? should the emphasis be on agriculture,
  manufacturing or services, should it be on sport
  and leisure or housing?
• How should goods and services be produced?
  labour intensive, land intensive, capital
  intensive? Efficiency?
• Who should get the goods and services produced?
  even distribution? more for the rich? for those
  who work hard?

4
Opportunity Cost

• Definition the cost expressed in terms of the
  next best alternative sacrificed
• Helps us view the true cost of decision making
• Implies valuing different choices

5
Free Market Economy

• Self regulating
• Self-interest- Sellers want to make the most
  money possible
• Competition- Prices should be as high as
  possible, while still competitive

6
Supply Curve

• The more we produce the more it costs to produce

Supply Schedule Price Q 1 12 2 28 3 42 4 52
5 60
7
Demand Curve

• The higher the price of an item the lower its
  demand

Demand Schedule Price Q 5 10 4 17 3 26 2 38
1 53
8
Supply/Demand Curve

• Maximize profits and fill demand

Supply meets demand exactly Max profit and
sales
9
Entrepreneurship

• The act of undertaking a business venture
• Must weigh risks vs. incentives
• Know the market

10
Questions

• 1. What is risk?
• 2. What is incentive?
• 3. What do you predict will happen when an
  entrepreneur perceives that the risks outweigh
  the incentives?
• 4. What do you predict will happen when an
  entrepreneur perceives that the incentives
  outweigh the risks?