scarcity

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scarcity

• Carol Mathias

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Scarcity is the problem of economics.

• Scarcity occurs because peoples wants and needs
  are unlimited, and the resources needed to
  produce goods and services are limited.

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Things that are scarce

• Money is scarce! (no kidding!)

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Things that are scarce

• There is only so much oil in the world.

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Things that are scarce

• In Japan, 96 of all the land in the country is
  being used. Land is scarce. Prices for
  renting space in the Ginza District is 6,000 per
  square foot.

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Things that are scarce

• Elephants are on the critical list of endangered
  species. Poachers kill them for the ivory,
  Asian medicines and aphrodisiacs.

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Economics

• The social science that deals with how society
  allocates its scarce resources among its
  unlimited wants and needs.

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Economics

• Economists advise individuals or societies about
  choosing which needs to satisfy and how much of
  our resources we need to satisfy those needs.

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Resources

• The factors of production
• Natural resources
• Human resources
• Capital resources
• entrepreneurship

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There are two branches in Economics

• Macroeconomics
• Microeconomics

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Macroeconomics

• The branch of economics that examines the
  behavior of the whole economy at once.

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Macroeconomics

• Alan Greenspan is a macroeconomist. His position
  at the Federal Reserve calls for him to determine
  interest rates and control the money supply for
  the economy.

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Microeconomics

• Microeconomics is the branch of economics that
  examines the choices and interaction of
  individuals concerning one product, firm or
  industry.

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Microeconomics

• Microeconomists would be interested in why people
  prefer Coke over Pepsi, or how to make more
  money on the Stock Market.

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Economists seek answers to

• What to produce?
• How to produce?
• For whom are they producing for?
• The Three Basic Economic
• Questions!

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Economists.

• Try to answer the basic economic questions.
• Evaluate the options for production.
• Analyze the potential opportunity costs
  (trade-offs) and opportunity benefits of any
  decision.

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Economists use theories to explain their ideas

• A theory is a model or a simplified description
  of reality.
• EXAMPLE OF A THEORY
• Wage Differential Theory The Glass Ceiling

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The Economic Way of Thinking

• People gain from voluntary trade.
• Everything has a cost.
• People choose for good reasons.
• Incentives matter.

• People create economic systems to influence
  choices and incentives.
• The value of goods or services is affected by
  peoples choices.

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The Economic Way of Thinking

• Economic thinking is marginal thinking.
• Economic actions create secondary effects.
• The test of a theory is its ability to predict.

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Lesson Summary

• The essence of economics is logic.

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Steps of Decision Making Grids

• Identify the problem.
• List alternatives for answering the problem.
• List criteria what you want to get out of your
  decision.
• Rank criteria with alternatives.
• Make the decision.

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Exchange

• If consumers buy more Motorola phones over
  Sprint, what does that tell Motorola?

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Exchange

• Producers gain information through a process
  called an EXCHANGE it which producers and
  consumers agree to provide one type of item for
  another.

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Exchange takes one of three forms

• Barter
• Money
• Credit

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Money has three functions

• Standardized item that is generally traded for
  goods and services.
• A measure of value that allows both producers and
  consumers to determine and express worth.
• A store of value that can be saved and used to
  purchase at a later date.

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Money has VALUE

• Value is determined by a products UTILITY.
• Usefulness to a person.

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MOST items have DMU

• Diminished Marginal Utility usefulness
  decreases as it is used more and more.

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Other Terms to know

• Goods Physical objects that are purchased.
• Services actions or activities done for a fee.
• Capital Resource capital goods and money.
• Capital Goods buildings, machinery, tools, etc

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Terms to Know

• Consumer Goods what people buy.
• Productivity level of output that results from
  a level of input.
• Efficiency having the least possible input and
  get the greatest output.

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Terms to Know

• Credit Third form of exchange. People can use
  item while paying for it.
• Self-sufficiency people fulfill needs without
  outside assistance.

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Terms to Know

• Interdependence one area can influence the
  economy in another sector or the world.