Intro to Economics The Concepts Economics The study

Intro to Economics The Concepts

Economics • The study of how we make decisions in a world where resources are limited (the science of decision making)

Scarcity • The inability to satisfy all needs (necessary for survival) and wants (things we would like to have) at the same time. • All resources and goods are limited. • This requires that choices be made.

Resources • Factors of production that are used in the producing of goods and services • Types are: –Natural –Human –Capital –Entrepreneurship

Choice • Selecting an item or action from a set of possible alternatives. • A person must choose/make decisions about desired goods and services because they are limited.

Opportunity Cost • What is given up when a choice is made • A person must consider the value of what is given up when making a choice.

Price • The amount of money exchanged for a good or service • Interaction of supply and demand determines price • Price determines who acquires the good or service

Incentives • Things that incite or motivate • They are used to change economic behavior

Supply and Demand • The interaction between supply and demand determine price • Demand is the amount of a good or service that consumers are willing and able to buy at a certain price. • Supply is the amount of a good or service that producers are willing and able to sell at a

Production • The combining of human, natural, capital, and entrepreneurship resources to make goods or provide services. • Resources available and consumer preferences determine what is produced.

Consumption • Using goods and services • Consumer preferences and price determine what is purchased.

Entrepreneur • A person who takes a risk to produce goods and services in search of profit • May establish a business according to any of the three types of organizational structures (proprietorship, partnership, corporation)

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