What is Economics Economic Choices Citizens must make

Economic Choices �Citizens must make them every day. �Choices occur because resources are limited

Economic Choices (cont. ) �Economics is the study of decisions made in a world

Economic Choices (cont. ) �Economic models include: • Microeconomics: focuses on the small picture

The Problem of Scarcity �Scarcity means there is not enough �Scarcity of resources forces

The Problem of Scarcity (cont. ) �Countries have to make choices: • What to

Trade-Offs �People must understand the costs and benefits of economic choices to make the

Trade-Offs (cont. ) �Opportunity cost is the second best use after choosing one thing

Costs and Revenues �There are ways to measure different types of costs and benefits.

Costs and Revenues (cont. ) �Types of Costs: • Fixed: does not change; has

Costs and Revenues (cont. ) �Types of Revenues (money coming in) • Total revenue

Costs and Revenues (cont. ) �Marginal benefit is an additional benefit associated with an

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What is Economics?

Economic Choices �Citizens must make them every day. �Choices occur because resources are limited �Needs are required, such as food and shelter �Wants make life more comfortable and enjoyable, like vacations

Economic Choices (cont. ) �Economics is the study of decisions made in a world of limited resources • How things are made, bought, sold and used

Economic Choices (cont. ) �Economic models include: • Microeconomics: focuses on the small picture (individuals and businesses) • Macroeconomics: focuses on the big picture (governments, whole industries, societies) �US functions on free enterprise capitalismproduce things their people want and need

The Problem of Scarcity �Scarcity means there is not enough �Scarcity of resources forces people to make economic decisions • No country has enough resources to produce what is necessary

The Problem of Scarcity (cont. ) �Countries have to make choices: • What to produce? • How to produce? • For whom to produce?

Trade-Offs �People must understand the costs and benefits of economic choices to make the best choice �A trade-off requires someone to decide to do one thing rather than another • Made by individuals, businesses, societies

Trade-Offs (cont. ) �Opportunity cost is the second best use after choosing one thing over another • Includes money, time, inconveniences, and so on

Costs and Revenues �There are ways to measure different types of costs and benefits.

Costs and Revenues (cont. ) �Types of Costs: • Fixed: does not change; has to be paid no matter what • Variable: changes based on what is produced • Total: fixed costs + variable costs • Marginal: cost of producing one additional unit of output

Costs and Revenues (cont. ) �Types of Revenues (money coming in) • Total revenue = number of units sold multiplied by average price per unit • Marginal revenue: made by selling one extra unit of a product

Costs and Revenues (cont. ) �Marginal benefit is an additional benefit associated with an action �Cost-benefit analysis requires rational economic decision making