What is Economics THE STUDY OF INDIVIDUAL CHOICES

What is Economics? THE STUDY OF INDIVIDUAL CHOICES CONCERNING THE USE OF RESOURCES AMONG COMPETING GOALS GETTING THE BEST AND THE MOST FROM SCARCE RESOURCES HOW BEST TO ACHIEVE YOUR GOALS

Wealth • The subjective evaluation of well being? How YOU doin’? • Economics is about much more than money. • Finance is a branch of economics; economics is not finance.

Vocabulary • Goal – something that a person wants to have or do • Resource – something that can be used to achieve goals • Human capital – skills, knowledge, experience, personal qualities • Natural resources – resources that are present without human help, also called “land” • Physical capital – goods that have been produced to produce other goods and services • Entrepreneur – a person who organizes productive resources, takes risks, and finds new ways of combining resources to produce a product

Short term goals • • Do something fun after school Do something fun this weekend Learn to play a new game Learn a new skill

Long Term Goals • College • Want do you want to be when you grow up? • What kind of house do you want when you grow up? • How many children do you want?

Social Goals

Resources – inputs in production, things that can help us achieve our goals • • Natural Resources, also called Land Physical Capital Human Capital Entrepreneur

Human Capital

Land – Natural Resources

Physical Capital

Entrepreneurship

Economics vs. Finance • Money is not a resource. • Economics is about resources. • Finance is about money.

Bad News: Scarcity • Our resources are insufficient to achieve all of our goals or to satisfy all of our wants. • We can’t have everything we want. • Wants/goals, not needs

Good News: Economics • Using economic reasoning, we can get more from the resources, like pulling rabbits out of a hat.

Scarcity and Economics • Scarcity (the bad news): we can’t do or have everything we want; there aren’t enough resources. • Economics (the good news): we can get the most from the resources we do have.

Economics is about using resources to achieve goals • What college to attend

Economics is about using resources to achieve goals • Work or not

Economics is about using resources to achieve goals • Who to date

Economics is about using resources to achieve goals • Poverty

Economics is about using resources to achieve goals • Environment

Economics is about using resources to achieve goals • Endangered species

Economics is about using resources to achieve goals • Drug abuse

Economics is about using resources to achieve goals • Education

Individual Goals: What We Want • • • Health Friends and Family Career Peace Love Stuff 11/4/2020 Lesson 1: Scarcity 24

Social Goals: What We Want 1. 2. 3. 4. 5. 6. More and better education A cleaner environment More and better health care Greater public safety Less stress Preservation of non-renewable resources including natural resources 7. Elimination of poverty 11/4/2020 Lesson 1: Scarcity 25

Here’s the Deal • Resources are insufficient to reach all of our goals. • “We can’t have everything we want. • We make choices. • Choices have costs. • So we should be careful about the choices we make. • The question is always, “What is the best use of our resources? ”

Three Questions Every Economist Will Ask • Is this choice the best use of our resources? • Will this choice achieve the goal? • What are the likely unintended consequences of this choice?

Economics • The problem – scarcity • The goal – maximize individual and societal wealth • The method –-- economic reasoning --how best to achieve our goals