Chapter 1 Section 1 What is Economics

Chapter 1 Section 1

What is Economics? § Economics is the study of how society chooses to use scarce resources to satisfy its unlimited needs and wants

What’s the purpose of studying it? n n n Fair question. Economics gives you the basic background on how the real world works in terms of money Why is that important? It helps you process information on how the real world works and why things are the way they are. You can improve yourself by understanding the concepts of how it affects your daily life everyday from buying gas, to going to the movies to getting a job or a car loan to getting a grant or scholarship to college.

Where do we begin with Economics? n Lets start w/ something you already know about. n Needs q q vs. Wants Right now get out a full piece of paper First write down all of the things you need to survive (your i-pod and cell phone should not be on this list)

Needs n Needs are essential for survival n Good examples should include: q q q Food Water Clothing Shelter Do you need money for survival? Not necessarily

Wants n n n Wants are something that people desire but is not necessary for survival Continue on your piece of paper, you have three minutes to write down every want you desire (keep this PG-13 because we will be sharing this list in class in a couple of minutes) Oh yea, the biggest list receives the first sucker of the semester

§ Microeconomics is the study of a single factor of an economy—such as individuals, households, businesses and industries (supply/demand/market structure) § We will be studying this the first part of the semester

What is Macroeconomics? § Macroeconomics is the study of an entire economy or one of its principles (GDP, Business Cycle, Unemployment, Inflation, Money, FED). (We will be studying 2 nd part of the semester).

• Good: An object or material that can be purchased to satisfy human wants and needs • Service: Any action or activity that is performed for a fee

Scarcity • It’s the principle that limited amounts of goods and services are available to meet unlimited wants • What does that mean? • Scarcity at some point forces people to make choices. – Do I study or go out with my friends? – Do I buy a dollar menu meal or go to Perkins if I only have $10 for the week? • Scarcity makes you choose.

Best example of scarcity? n Oil; at some point it will run out. It is a limited resource which forces us to make decisions how much we should drive or fly

Scarcity • Individuals have wants that are unlimited. – But the total resources of society are limited • As a result, it isn't possible for everyone to have everything he or she wants.

Scarcity • Scarcity does not mean rarity – Something could be rare, but if no one wants it, it wouldn’t be scarce in economic terms • it must be both limited & desirable--again pointing to the relativity of the concept.

Get that piece of paper out again. . • Now…. provide examples of your daily economic decisions. (what have been your decisions you made in the past 12 weeks) • What were the key influences on these decisions? – (For each of us, it will probably be different)

What are the four Economic Resources? § Natural Resource § Human Resource § Capital Resource § Entrepreneurship

Natural Resource-- Items provided by nature to produce goods and provide services (timber, oil, element table)

Human Resource. Any human effort exerted during production either by physical or intellectual effort (by a person)

Capital Resource • Capital Resource– The manufactured materials used to create products like buildings, structures, machinery or tools used in production

Entrepreneurship The combination of organizational abilities and risk taking involved in starting a new business or introducing a product

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