What is Economics How do economists study the

Economic Choices ● Economics is the study of how people make decisions in a

The Four Factors of Production ● The 4 resources necessary to produce goods and

Making Economic Decisions ● Trade Offs: the alternative you face if you decide to

Production Possibilities Curve ● The Production possibilities curves shows what things can possibly be

Economic Systems ● Traditional Economies: Decisions are made based on customs and traditions. ●

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What is Economics? How do economists study the ways people make decisions on how to use their time, money, and resources?

Economic Choices ● Economics is the study of how people make decisions in a world of limited resources. ● Responsible citizens make economic decisions everyday. We have to make these choices because we have limited resources. ● Scarcity ● - Scarcity: the fact that we do not have enough resources to satisfy everyone’s needs and wants ● Needs vs. Wants

The Four Factors of Production ● The 4 resources necessary to produce goods and services ● 1. Natural Resources: all of the “gifts of nature” that make production possible ● 2. Labor (workers): physical and mental efforts that people contribute to the production of goods and services ● 3. Capital/Capital Goods: tools, machinery, and goods used to make other things ● 4. Entrepreneurs: individuals who start new businesses, introduce new products, and improve management techniques

Making Economic Decisions ● Trade Offs: the alternative you face if you decide to do one thing rather than another. ● You face trade-offs in deciding how to spend your time and money. Society faces trade-offs in determining how to distribute scarce resources. ● Opportunity Cost: is the item you did not choose and is the next best alternative to the thing you actually chose.

Production Possibilities Curve ● The Production possibilities curves shows what things can possibly be produced by a business at a given time. ● This model shows us that we are limited in the number of a certain good we can produce because of scarcity. When we choose to produce more of one good, we must give up production of the other. ● “Guns vs. Butter” – do we invest more in defense or civilian goods?

Economic Systems ● Traditional Economies: Decisions are made based on customs and traditions. ● Capitalism (Market Economy): an economic system in which individuals have choice on how to use the Factors of Production (Fo. P). Buyers and sellers may freely interact with little government interference. ● Command Economy (Communism): the government owns and decides how to use the Fo. P and makes all the decisions. ● Socialism: an economic system where the community owns the Fo. P, and decisions are made through people working together for “The Common Good. ” ● Mixed: A mixture of any of the above economic systems.