What is Economics Chapter 1 1 What is

What is Economics? Chapter 1. 1

What is Economics? (textbook) The study of people producing and exchanging to get the things they want. ¡ The study of how individuals and societies make choices about ways to use scarce resources to fulfill their wants. ¡

What is Economics? (real life) Economics is a tool ¡ Economics is NOT about money ¡ Economics is benefit/cost analysis ¡ If you can weigh the benefits and costs of alternative choices, you can do economics! ¡

What is Scarcity? (textbook) The inability to satisfy all of everybody’s wants. ¡ Trying to meet unlimited wants with limited resources. ¡

What is Scarcity? (real life) Scarcity is the reason we need economic systems (more to be revealed) ¡ Cookie Monster! ¡ “We always come back for more” ¡ Scarcity leads to trade-offs ¡ Trade-offs lead to opportunity costs ¡

Scarce Resources ¡ Factors of Production l Resources of land, labor, capital and entrepreneurship used to produce goods and services

Factors of Production ¡ Land/Natural Resources l ¡ Labor/Human Capital l ¡ Human effort directed toward production goods and services Capital l ¡ Natural resources and surface land water Previously manufactured goods used to make other goods and services Entrepreneurship l Individuals who take risks to develop new products and start new businesses

Scarcity and rationing Because things are scarce, we must ration ¡ What different kinds of rationing are there? ¡ l l CD’s Concert wrist bands DECA Trophy Transplant organs

Costs vs. Price ¡ Price is not the only cost of something l What are some other costs? Cost is what we give up ¡ Price is merely a rationing tool ¡

Important Facts about Costs ¡ Your cost is not my cost l All costs are subjective “Things” don’t have cost until you “decide” to use them ¡ All costs are in the future ¡ Costs in the past are sunk—get over it! ¡ Only a small portion of costs are monetary ¡