JA Economics Chapter One What is Economics?

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Economics

 Social science that studies how people decide to use scarce resources to satisfy their wants  Together and as groups

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Want vs. Needs

 Review the difference  What is the want-satisfaction chain?

 See page 3 in textbook

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Want-Satisfaction Chain

 Production  Combines economic sources  Results in a good or service

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Want-Satisfaction Chain

 Distribution  Process of getting a product or service to consumers

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Want-Satisfaction Chain

 Consumption  Using a product or service  Thought to complete the chain  Consumer choses another product or service to want

Want

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Resources Needed Want satisfaction Method of Production Source of availability for Consumption Method of Distribution

Want-Satisfaction Chain

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Factors of Production

 Natural resources  Land – soil, minerals, timber, and fresh water  Human resources   Physically Mentally  Capital    Buildings Tools Machines used for production

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Scarcity

 Occurs when wants > available resources  Demands that people make choices  Choices give way to opportunity cost

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Opportunity Cost

 The highest valued alternative given up as a result of making a choice  Resources can only be used one time  Alternatives that are given up  Go to page 5 of the study guide

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Economic way of thinking

 Scarcity forces people to chose  All choices involve alternatives    You give up one thing for another There are benefits and costs to making the right choice.

People try to maximize their benefits while minimizing their costs

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Economic way of thinking

 People try to make good choices  People respond to incentives(positive)  Disincentive is like a fine or punishment.

 People gain when they trade voluntarily  Nobody has to trade in US  All people trade to gain

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Economic way of thinking

 Choices are future orientated  Cannot change past choices  Our Choices are influenced by the Choices of Others  Book talks about oil and interest rates  All economic study involves choices  All choices though do not need money  Example would be volunteer work

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Thinking at the Margin

 Resources are scarce  Must make careful choices  Economists analyze marginal benefits and marginal costs  Marginal simply means additional  (Bottom of page 9)

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Choice-Making by Businesses  Face same scarcity problems  Must pay for scarce items  Looks for the lowest opportunity cost

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The Profit Motive

 Goal of most businesses  Profit = total sales > total costs  Losses limit the life of the company  Business people think at the margin  Page 8 & 9 of study guide

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Basic Economic Decisions in a Market Economy      Free enterprise or capitalism Relies on voluntary trade Markets allow consumers and sellers to make exchanges Both weigh the costs and benefits to make a choice What, how and for whom?

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Micro or Macro

 Macro = whole    “big picture” Nationally As a group  Micro = individual consumers and businesses    What will you pay?

How much should an employees salary be?

Should we buy new computers?

HOMEWORK

  1-4 10-11