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What Is Economics?

What Is Economics?. Chapter 1. Goals & Objectives. Fundamental Economic Problem. 3 Basic Economic Questions. Relationship among: Value, Utility, Wealth, Scarcity. Construct of Economic Activity. Trade-offs & Opportunity costs. The Fundamental Economic Problem: Scarcity.

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What Is Economics?

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  1. What Is Economics? Chapter 1

  2. Goals & Objectives Fundamental Economic Problem. 3 Basic Economic Questions. Relationship among: Value, Utility, Wealth, Scarcity. Construct of Economic Activity. Trade-offs & Opportunity costs.

  3. The Fundamental Economic Problem: Scarcity • Societal Wants vs. Individual Needs • SCARCITY: Free Markets or Socialism • ECONOMICS—people and their wants and needs…The Role of Government

  4. Scarcity

  5. Scarcity • List scarce resources: • Scarcity+Socialism= WAR! • Japan WWI • Germany WWI; WWII • Communist Revolutions • Socialism & Poverty

  6. Modern Day Socialism & Elite System of Government

  7. TINSTAAFL • “There is no such thing as a free lunch!” • Explain: food, shelter, insurance, clothing, gas, water, cell phones, subsidies, bailouts, etc… • The Role of Government: the redistribution of wealth….Socialism protecting the Elite Class from competition

  8. Gov’t Handout vs Free Enterprise

  9. TINSTAAFL • ENTITLEMENTS: Who Pays? Who Benefits? • Welfare, Food Stamps, Medicaid, Obamacare, SSD, SSI, Pre-K, Subsidized: Housing, Cell Phones, College, etc… • Subsidies: Who Pays? Who Benefits? • Bail-outs: Who Pays? Who Benefits?

  10. Welfare vs. Workers

  11. 3 Economic Questions all Societies must answer • WHAT TO PRODUCE?.. • HOW TO PRODUCE?.. • FOR WHOM TO PRODUCE?..

  12. Capitalism/Free Markets: What?: Individual How?: Individual For Whom?: Individual Communism/ Socialism What?: Government or Elite Class How?: Government or Elite Class For Whom?: Government or Elite Class ECONOMIC SYSTEMS

  13. Economic Comparison

  14. 4 factors of production • Land…explain how it causes production 2. Capital….explain how • Financial capital: • Capital Goods 3. Labor…explain how it causes production 4. Entrepreneurs: Key Component to Producation • Societies that possess all factors of production are wealthy • Adam Smith: Causes of Wealth

  15. Obama & New Order

  16. GDP • GROSS DOMESTIC PRODUCT: total #/amount of goods and services produced in the U.S. market • Economic Products: • Goods… • Consumer goods… • Capital goods…. • Services…. • Consumers….

  17. Value, Utility, Wealth • Diamonds vs. Water? • Which has more Value? • Which has more Utility? • Which has/creates more Wealth? • Useful: • Wealth: • Paradox of Value: Scarcity by itself is not enough to create value

  18. Paradox of Value

  19. JIT THEORY (Just in time) Post WWII theory of production. Why? Free Trade agreements and an end to protective tariffs. JIC THEORY(Just in case) Pre WWII theory of production. Why? Article I Section 8 Clause 1: Duties, Imposts (Protective & Revenue Tariffs) Types of Productivity

  20. JIT vs. JIC Theory

  21. Division of Labor • Wages and Specialization of labor? • Free Markets reward specialization. • Socialism marginalizes specialization. • High in service vs. Low in service ( Doctors and Check-out clerks) • Why would industry convert to specialization of production?

  22. Specialization & Wages

  23. Economic Interdependence • Explain: “the gain in productivity and income as a result of increased specialization almost always offsets the costs associated with the loss in self- sufficiency”. • Capital Goods & Efficiency: Consumer Costs

  24. Adam Smith • Father of free markets and “capitalism” • The Wealth of Nations (1776) • Radical ideas? • The Invisible Hand • Laissez-faire • Rich (Aristocracy) vs. Competition

  25. Smith vs. Elite System of Gov’t

  26. Elite Gov’t Class Monarchy Dictatorship Communism Socialism A Government: What? How? For Whom? Individual Freedom Free Enterprise Capitalism Laissez-faire Competition Innovation Creativity Individual Wealth Elite vs. Freedom to produce

  27. Trade-Offs: Gov’t Bailouts No Gov’t Bailouts Entitlements No Entitlements Subsidies No Subsidies Opportunity Costs: Time Free Trade/No Taxes vs. High Standard of Living Skilled vs. Unskilled immigrants Economic Choices

  28. Free Enterprise System • Willing Buyer • Willing Supplier • Role of Government • Standard of Living: • Adam Smith’s laissez-faire policies

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