Transcript Unit 1: Fundamental Economic Concepts

Unit 1: Fundamental
Economic Concepts
Chapter 1: What Is Economics?
Chapter 1: What Is Economics?
• Economics is the study of how people try to
satisfy what appears to be seemingly unlimited
and competing wants through the careful use of
relatively scarce resources.
Chapter 1: What Is Economics?
• Scarcity is the condition that results from
society not having enough resources to
produce all the things people would like to
have.
• Need is a basic requirement for survival
and includes food, clothing, and shelter.
• Want is a way of expressing a need.
Chapter 1: What Is Economics?
• TINSTAAFL “There Is No Such Thing As A
Free Lunch” – resources are limited,
virtually everything we do has a cost, even
when it seems as if we are getting
something for free.
Chapter 1: What Is Economics?
3 Basic Questions every society must answer
1. What to produce?
2. How to produce?
3. For whom to produce?
Chapter 1: What Is Economics?
Factors of Production – resources required to
produce the things we would like to have.
1. Land
2. Capital (money and machinery)
3. Labor
4. Entrepreneurs
Chapter 1: What Is Economics?
Trade Offs and Opportunity Costs
• Trade Offs – alternative choices
• Opportunity Costs – the costs of the next best alternative
use of money, time, or resources when one choice is
made rather than another → the opportunity cost is the
product(s) you gave up.
** Even time has an opportunity cost → you take an
economics class. Your opportunity cost is the other
classes you could have taken at the same time period.
Chapter 1: What Is Economics?
• We can see trade offs and opportunity
costs by constructing a decision-making
grid. Lets say you have $50.00. How do
you spend it?
Chapter 1: What Is Economics?
Decision-Making Grid
Alternatives
Costs $50 or
Less
Durable?
Will Parents
Approve?
Future Expenses
Unnecessary?
Can Use
Anytime?
Several CDs
Yes
Yes
yes
yes
No
Concert Tickets
Yes
No
No
No
No
CD Player
Yes
Yes
Yes
No
Yes
Soccer Ball
Yes
Yes
Yes
Yes
No
Jeans
Yes
Yes
yes
Yes
Yes
Chapter 1: What Is Economics?
• Economic Products are goods and services that are
useful, relatively scarce, and transferable to others.
• Goods are an item that is economically useful or satisfies
an economic want.
• Consumer Good is intended for final use by individuals.
• Capital Good is when manufactured goods are used to
produce other goods and services they are called capital
goods.
Chapter 1: What Is Economics?
• Service is work that is performed for someone.
• Consumer is a person who uses goods and services to
satisfy wants and needs.
• Value refers to a worth that can be expressed in dollars
and cents. **Scarcity is required to have value.
• Utility – in order for something to have value, it must also
have utility or the capacity to be useful and provide
satisfaction.
Chapter 1: What Is Economics?
• Durable Good is any good that lasts 3 years or
more when used on a regular basis (consumer
and capital goods).
• Non-Durable Good is an item that lasts less than
3 years when used on a regular basis.
Chapter 1: What Is Economics?
• Paradox of Value is the situation where some
necessities, such as water, have little monetary
value, whereas some non-necessities, such as
diamonds, have a much higher value.
• Economic Growth occurs when a nation’s total
output of goods and services increases over
time.
Chapter 1: What Is Economics?
• Productivity is a measure of the amount of output
produced by a given amount of inputs in a specific period
of time. Productivity goes up whenever more output can
be produced with the same amount of inputs in the same
amount of time. ** Is usually applied to labor, but applies
to all factors of production.
• Division Of Labor takes place when work is arranged so
that individual workers do fewer tasks than before →
assembly lines
Chapter 1: What Is Economics?
• Specialization takes place when factors of production
perform tasks that they can do relatively more efficiently
than others.
• Human Capital is the sum of the skills, abilities, health,
and motivation of people.
•
Economic Interdependence means that we rely on
others, and others rely on us, to provide the goods and
services that we consume.
Chapter 1: What Is Economics?
The End