An introduction to economics Unit 1 1 Explain

An introduction to economics Unit 1 1. Explain the definition of economics. 2. What is the difference between macro- and micro-economics? 3. Why does scarcity matter so much to us? 4. What is a market? Why is what is available in a market key to understanding economics?

What is an economy? Everyone, from individuals to governments, make decisions that influence how resources are used. An economy is the system a country uses to manage its money and resources.

What is economics? Now that we know what an economy is, what is economics? Economics is the study of choice: how people choose to use their resources. Resources are anything used to produce an economic good or service. • Good: physical product (french fries) • Service: work done (intangible; cashier)

How do we study economics? Society makes two kinds of choices: micro (small) and macro (large). Microeconomics—the study of decisions by parts of the economy – Individuals, families, businesses – Consumers and producers’ demand supply of a particular product

How do we study economics? Macroeconomics—the study of decisions for the economy as a whole – Nationwide decisions, “big picture” decisions – All goods/services exchanged in an economy

Where does economics happen? A market is any place or method used by buyers and sellers to exchange goods and services. The U. S. is a mixed free market, where consumers and businesses buy/sell products with little government restriction • Also called “free enterprise system” – Individuals sell labor, businesses sell products to make a profit, consumers buy/not buy – Consumers and businesses benefit from exchange in free market

#1 Principle of Economics Scarcity forces trade-offs. • We have unlimited wants, but limited resources—scarcity. • When you have to choose one thing over another because of this, you make a trade -off. – Called the scarcity-forces-trade-offs principle (“no free lunch principle”) – Every choice involves a trade-off

How does it work? The cause-and-effect chain Unlimited Wants All people have unlimited wants. This causes the effect of scarcity. Scarcity Unfortunately, there are limited resources to meet these wants. Society Chooses This makes people have to choose what they will produce and buy.

Check yourself… • Why is there no such thing as a “free lunch”? • What is economics? • What is the difference between micro and macro economics? • Why are things scarce? What does this force us to do?