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Economics

Economics. What is Economics?. The study of choices. Macro is the study of the national economy as a whole = we study economic output, inflation and unemployment of the nation.

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Economics

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  1. Economics

  2. What is Economics? • The study of choices

  3. Macro is the study of the national economy as a whole = we study economic output, inflation and unemployment of the nation. Micro is the study of individuals, firms and industries = we study how prices and output are determined for a firm or industry Micro vs. Macro Economics

  4. What is Economics? • The study of choices • The role of wants • there are unlimited wants

  5. What is Economics? • The study of choices • The role of wants • there are unlimited wants • The role of scarcity • there are limited resources • Shortage vs. Scarcity

  6. What is Economics? • The study of choices • The role of wants • there are unlimited wants • The role of scarcity • there are limited resources • The role of opportunity costs • choosing how to use our resources has consequences

  7. Opportunity Costs = • Forgoing one product or opportunity for another The opportunity cost is the next best alternative

  8. Opportunity Costs • Opportunity cost are measured in: • time - a basketball game vs. movies

  9. Opportunity Costs • Opportunity cost are measured in: • time - a basketball game vs. movies • goods - new shoes vs. compact disc

  10. Opportunity Costs • Opportunity costs are measured in: • time - a basketball game vs. movies • goods - new shoes vs. compact disc • resources - wilderness vs. minerals needed for production

  11. Opportunity Costs • Decisions on how to use our resources, time and money are basedonhow muchutilitythat a product or service gives us • Utility = usefulness of a product or service or the satisfaction you receive from a product or service • What gives you utility right now? Your Pencil or Pen

  12. Opportunity Costs • Utility varies depending on needs • for example your downhill skis don’t give you much utility in the summer months

  13. Opportunity Costs Utility varies depending on needs for example your downhill skis don’t give you much utility in the summer months OC varies from one person to another Skis- no OC for non-skier OC changes over time – food and level of hunger

  14. Economic Goodvs.Economic Service Service = intangible, actions that one person performs for another Good = tangible, physical object

  15. FACTORS OF PRODUCTION • ALL RESOURCES THAT ARE USED TO MAKE GOODS AND SERVICES • LAND • LABOR • CAPITAL

  16. LAND • NOT ONLY REAL ESTATE • ALL NATURAL RESOURCES USED TO PRODUCE GOODS AND SERVICES

  17. LABOR • WORKERS – EFFORT A PERSON DEVOTES TO A TASK FOR WHICH THAT PERSON IS PAID • PHYSICAL EFFORT • MENTAL EFFORT

  18. PHYSICAL CAPITAL • HUMAN MADE OBJECTS • BUILDINGS AND TOOLS • PHYSICAL CAPITAL = GREATER PRODUCTIVITY

  19. HUMAN CAPITAL • KNOWLEDGE AND SKILL A WORKER GAINS THROUGH EDUCATION AND EXPERIENCE

  20. PUTTING IT ALL TOGETHER • WHO DECIDES HOW TO COMBINE LAND, LABOR, AND CAPITAL RESOURCES? • ENTREPRENEURS • JOHN D. ROCKEFELLER • ANDREW CARNEGIE • SAM WALTON • RAY KROC • BILL GATES

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