Unit 1 PPT - Mrs Ellwanger
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Transcript Unit 1 PPT - Mrs Ellwanger
Unit 1 - Intro to Economics
What is economics?
Intro to Econ
A. Economics- the study of human efforts to satisfy unlimited wants and needs.
- Economics is a social science that deals with people and how they deal
with scarcity.
B. Scarcity- not having enough resources to produce everything people want.
1. Scarcity is the most fundamental economic problem.
2. There is no such thing as a free lunch- everything involves some
time, money, or resources.
C. Three basic economic
questions
1. What to Produce- food vs. shelter vs.
defense
C. Three basic economic
questions
1. What to Produce- food vs. shelter vs.
defense
2. How to Produce- factories vs. hand made
C. Three basic economic
questions
1. What to Produce- food vs. shelter vs.
defense
2. How to Produce- factories vs. hand made
3. For whom to Produce- who is your target
audience? how did you decide?
D. Factors of production
1. Land - Natural resources including forest, fields, minerals, water, etc.
2. Capital – tools and equipment used to make goods and services.
Financial capital- money used to buy tools and equipment for production.
3. Labor- people to do the work. Can change in time (growth,
immigration, war)
4. Entrepreneurs- driving force of the economy. Take risks to gain profit
E. Economic Systems
1. Traditional- economic activity based on habit or custom
E. Economic Systems
1. Traditional- economic activity based on habit or custom
2. Command- central authority decides how to answer the
economic questions.
E. Economic Systems
1. Traditional- economic activity based on habit or custom
2. Command- central authority decides how to answer the
economic questions.
3. Market- people are free to act in their own self interest
E. Economic Systems
1. Traditional- economic activity based on habit or custom
2. Command- central authority decides how to answer the
economic questions.
3. Market- people are free to act in their own self interest
4. Mixed- combination of any of the above. Most countries
are mixed including
the US.
F. Opportunity Costs
1. Trade off- alternatives, if you can’t have everything you
must prioritize.
2. Opportunity Cost- The cost of your next best
alternative, including money, time, and resources when a
decision is made.
3. Production Possibilities Curve- diagram showing
combos of goods and
services that and economy can
produce. Use it to compare OC.
Production Possibility Curve
G. Needs and Wants
1. Need- basic requirements for survival ex. ____________________________.
2. Want- way of expressing a need ex. ______________________________.
H. Goods, Services, and
Consumers
1. Goods- tangible products, things you can see or
touch
a. consumer goods - final use is by the
consumer
b. capital goods - used to produce other goods and
services
c. durable goods - good that lasts more than 3
years under normal use
H. Goods, Services, and
Consumers
2. Services- work performed for someone else.
Ex.______________________ - fastest growing part of
economy
3. Consumers- people to use the goods and services
a. Consumption- process of using goods and services
b. Conspicuous consumption - use of a good or
services to impress others
I. Money - anything used as …
1. Medium of Exchange- is it accepted?
2. Standard of Value - how is the worth determined?
3. Store of value - does it hold its value or will it need
converted?
- Characteristics of Money- Portable, Divisible,
Durable, Stable, Intrinsic Value.
- Fiat money - money that has value because the gov’t
says so
- Currency - coins and paper bills used as money
J. Utility and Value
1. Utility- the capacity to be useful to someone.
Should vary person to person
2. Value- scarcity and utility together create value
3. Paradox of Value - why are some things we
need very cheap or worth nothing (water) and other
things we don’t need very expensive (diamond).
K. Circular Flow Diagram
1. Market- location or other mechanism that allow buyers and
sellers to deal
a. Product Market - producers offer G&S for sale for
money
b. Factor Market - resources are offered for sale for
money
Circular Flow
L. US Economic Goals
1.
2.
3.
4.
Freedom -- Choice of
occupation, employer, use
of money, etc.
Efficiency -- attempt to use
resources wisely.
Equity -- illegal to
discriminate on age, sex,
race, etc.
Security -- disability and
retirement income to those
who need it.
5.
Full Employment -- 5% or
less unemployment, but not
0%.
6.
Price Stability -- control
inflation, so people know
what to expect.
7.
Growth -- necessary
because of grown in
population.
Trade Offs -- increased security and
equity increase the unemployment
rate.
M. Capitalism and Free Enterprise
1.
Capitalism -- system where
private citizens own the
factors of production.
1.Role of Entrepreneur -employees better pay,
consumers better products,
governments more economic
activity.
2.Role of Consumer -Customer is always right.
3.Role of Government -Protector, Provider, Regulator,
Promoter.
1.
Free Enterprise
1.Economic Freedom -Everyone has choices.
2.Voluntary Exchange -Free to buy and sell from/to
anyone.
3.Private Property -- Control
your possessions as you
wish.
4.Profit Motive -- improve
materials and well being by
taking risk.