What is Economics?

1
What is Economics?
2
The fundamental economic problem

• Scarcity is
• the fundamental problem in economics. People
  and societies have unlimited wants, but the
  resources we have to satisfy these wants are
  limited.

3
What is economics?

• Economics is
• the study of how individuals and societies deal
  with scarcity. That is, how people satisfy their
  seemingly unlimited and competing wants with
  resources that are limited.

4
Trade-offs

• Because of scarcity, we cannot have everything we
  want. We must make choices between alternative
  uses of our limited resources, including income
  and time. We call these choices trade-offs.
• Its not simply about having enough money.

5
Opportunity costs

• The cost of the next best alternative use of
  your money, time or resources when you make an
  economic decision is your opportunity cost. Its
  the next best thing you had to give up.

6
Needs vs. Wants

• A need is a basic requirement for survival what
  you must have to stay alive.
• A want is a way of expressing a need. This is a
  much broader category.
• You need food, but you want a hamburger.

7
Goods Services

• The factors of production are used to produce
  goods and services.
• Goods a tangible commodity such as a CD, book or
  car.
• Services Work that is performed for a fee, such
  as auto repair or hair styling.

8
Factors of production

• These are the resources we use to produce the
  goods and services we need and want.
• The factors of production include land, labor,
  capital, and entrepreneurs.
• These are the limited resources we discuss in
  economics.

9
Land

• Natural resources not created by humans. They are
  gifts from nature.
• Examples air, water, wood, oil, gold.

10
Capital

• Tools, equipment and factories used in
  production. They are a result of production or
  man made.
• Examples Factories, schools, pencils, hammers.

11
Labor

• The effort, ability and skills of people.
  Basically, the work that people do.
• Examples teachers, stock brokers, janitors,
  librarians.

12
Entrepreneurs

• Risk takers in search of profits. They have the
  ability to start new businesses or create new
  products.
• Examples Bill Gates, Mrs. Fields, Ray Crock
  (McDonalds).