What is Economics

1
What is Economics

• Chapter 1

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Economics

• The study of how people satisfy wants with scarce
  resources. (Noble Prize winning Economist Milton
  Friedman)

3
Scarcity

• The condition where unlimited human wants face
  limited resources.

4
Microeconomics

• The study of the choices made by economic
• actors such as households, companies and
• individual markets.

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Marcoeconomics

• Behavior of entire economies.
• For example, unemployment in the United
• States is a macroeconomic topic.

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Three basic questions in Economics

• What must we produce-based on consumer
• needs and wants.
• How should we produce it-based on
• resources.
• For whom should we produce it- specify
• consumer interests.

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How do we make Economic Decisions?

• Need- Required for survival
• Want- Desired for satisfaction
• Goods- Physical, or tangible, objects that
• can be purchased.
• Services-Actions such as plumbing,
• teaching and taxi driving that people purchase.

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Factors of Production

• Necessary resources to produce what
• people want and need.
• Land
• Capital
• Labor
• Entrepreneurship

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Land

• Societys limited natural resources-
• landforms, minerals, vegetation, animal life
• and climate.

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Capital

• The means by which something is produced
• such as money, tools, equipment, machinery
• and factories.

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Labor

• Workers who apply their efforts, abilities,
• and skills to production.

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Entrepreneurship

• Risk-takers who combine the land, labor and
• capital into new products or services.