Introduction to Economics Chapter 1 The study of

Introduction to Economics Chapter 1

� The study of economics explains how productive resources are used to provide the goods and services that satisfy human wants and needs. � Scarcity is the fundamental economic problem facing all societies. We have limited resources and unlimited needs and wants.

Scarce Resources � Human � Natural � Capital

Factors of Production: � Land (natural resources) � Labor (human resources) � Capital (equipment, machinery) � Entrepreneurship

Basic economic questions: � What goods and services will be produced? � How will goods and services be produced? � Who will consume the goods and services? (How should it be shared? )

The study of economics… � Economics is considered a social science. Why? � What do economists do? is the difference between microeconomics and macroeconomics?

Needs v. Wants � Needs: Food Shelter Clothing

Goods v. Services

Factors influencing economic development… � Technology � Specialization � Division of Labor

GDP � Gross Domestic Product is the total value of all the goods and services produced for final use in an economy during a given year. It is the most comprehensive measure of an economy’s progress.

Circular Flow Model

Other important concepts: � Trade-off � Opportunity Cost � Production Possibilities Curve (PPC)

A final thought…. It is important to study economics for two main reasons – personal financial benefits and good citizenship