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Economics Chapter 1

Economics Chapter 1. The Economics Way of Thinking Mr. Hall. Introduction. Concepts. Wants Desires that can be satisfied by consuming a good or service Flat-Screen Television, Sports Car, Am. Eagle Jeans Needs Things that are necessary for survival Food, Clothing, Shelter Scarcity

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Economics Chapter 1

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  1. EconomicsChapter 1 The Economics Way of Thinking Mr. Hall

  2. Introduction

  3. Concepts • Wants • Desires that can be satisfied by consuming a good or service • Flat-Screen Television, Sports Car, Am. Eagle Jeans • Needs • Things that are necessary for survival • Food, Clothing, Shelter • Scarcity • State of not having enough resources to meet human wants • Economics • Study of how people use scarce resources to satisfy wants • Examines, Organizes, Analyzes, & Interprets Data • Developing Theories & Economic Laws

  4. Principal I • People Have Wants • Choice in how we use scarce resources • Needs can become wants • Wants are ever changing

  5. Principal II • Scarcity Affects Everyone • How best do we use resources • Scarcity affects which goods are made and services provided • Goods: Physical objects that can be purchased • Clothes, Cars, Televisions, etc. • Services: Work performed for payment • Healthcare, Education, Transportation, etc. • Scarcity: Affects the consumer and producer

  6. The Three Questions of Scarcity

  7. Q1. What Will Be Produced? • What will a society produce? • Food, Cars, Computers, etc. • What will be produced depends on resources available • Example Exception: Japan is a large producer of cars yet it has limited iron ore resources used to make steel. How can is this possible? • What are things that the United States produces?

  8. …Continued • Countries like the U.S. allow consumers and producers to decide what goods/services are made and provided • Countries’ governments such as those of Cuba, North Korea, and the former U.S.S.R. dictated what is/was produced • How much of a good/service is produced can depend on current economic trends • War, Depression, Economic Booms, can effect the number of goods that are produced

  9. Q2. How Will It Be Produced? • Using scarce resources in the most efficient way • Methods of production influenced by available resources • Example: Farming • Country A: • Large Unskilled Workforce • Many Workers Used w/ Few Machines • Country B: • Large Skilled Workforce • Capital-Intensive Approach • Few Workers w/ Many Machines

  10. Q3. For Whom Will It Be Produced? • How will goods and & services be distributed? • How much should people get? • Equal share or based on how much the consumer will pay? • How should shares be delivered? How will good reach the consumer? • Distribution systems must be developed • Roads, railways, air/seaports, trucks, trains, ships, planes, computer networks • MUST be efficient

  11. Factors of Production

  12. Four CategoriesLandLaborCapitalEntrepreneurshipOne Thing In CommonThey are ALL limited in supply

  13. Land & Labor • Land • All natural resources found on or under the ground that is used to produce a good or service • Timber, iron ore, crude oil, grain, etc. • Labor • Human time, effort, & talent that goes into making a product

  14. Capital • All resources made and used to produce & distribute goods & services • Tools, Machines, Airplanes, Warehouses, etc. • Physical & Real Capital • Human Capital • Knowledge & Skills • College Degree & Job Training

  15. Entrepreneurship • Combines vision, skill, ingenuity, & the willingness to take risks • Entrepreneurs are innovators • Anticipate wants of the consumer • Develop New • Products • Methods of Production • Way of Marketing/Distributing Products • Risk takers/possibility of failure

  16. Economic Choices Today Opportunity Cost

  17. Factors in Choice • Incentives • Benefits to encourage you a certain way • Better grades, higher wages, etc • Utility • Benefit or satisfaction gained • Economize • Making decisions based on what you feel is the best combination of cost and benefits

  18. Example You and a friend are deciding what to do this Friday night. You want to go see the new action movie but she wants to eat at the new restaurant in town and talk about helping you with your math homework? What are the incentives? Which has more utility?

  19. …Continued • Motivations for choice • Cost vs. Benefits • Guided by self-motivation • No free lunch concept • Every choice involves cost What was your motivations and costs of your choice for Friday night?

  20. Closing Terms

  21. Terms • Trade-Off: Alternative people give up when making a choice • Example: Summer Long College Course vs. Intensive Six Week College Course • Opportunity Cost: Value of something that is given up to get something else wanted • Take A Full Year Job vs. A Six Month Job & Travel • Cost-Benefit Analysis: Weighs benefits of an action

  22. Microeconomics • “Small” economics • Study of individuals, families, & businesses in an economic setting • Looks at prices, costs, profits, etc. • Studies business organization, labor markets, agricultural economics, and economics of environmental issues • Macroeconomics • “Large” economics • Study of the economy as a whole • Looks at the consumer sector • National & global trends

  23. Positive Economics • Economic behavior as it is • Uses scientific method • Tests against real world data • Normative Economics • Involves judgments of what economics behavior ought to be • Asks if actions were good • Economics through the moral lenses Example: The Lottery

  24. Adam Smith • 1723-1790 • Scottish born political philosopher • Considered the “Father of Modern Economics” • 1776-Published, “The Wealth of Nations” • Called for the end of Mercantilism • Called for Free Trade • People will work to satisfy their own economic needs • The “Invisible Hand” Concept

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