Transcript File
Introduction to What is Economics? • Economics: the study of the production, distribution, and use of goods and services. • Economic systems can be either large or small. The term “economy” can be used to refer to the economy of the country, the state, a city, a household, and even individuals. The basic economic problem in society is scarcity. • When something is scarce it means that there isn’t enough of everything to give everybody what they want. The opposite of scarcity is surplus. • A surplus exists when the supply of something is greater than the demand. What is supply and demand? How does it impact pricing? (stay tuned to find out) Goods: the actual products that people buy and sell. Services: work done by professionals. A person that purchases a good or service is known as a consumer. Consumers by goods and services to satisfy economic wants and needs. • Needs refer to items or services which are necessary for survival. • Wants refer to items which are nice to have, but are not necessary to survival. What are some examples of needs? Wants? Examples of Needs Examples of Wants • Food • Automobiles • Clean water • Entertainment (movies, • Shelter concerts, videos, games, etc.) • Clothing • Airplane travel • Medical care • Furniture • Heat • Appliances • Designer clothes What determines the price of goods? Let’s find out more about supply and demand. • Gourmet food • “Junk” food Supply and Demand • The supply of goods is the amount of products available to be purchased. • The demand for goods refers to how many people want a product and can readily afford to buy it. Supply Demand Situation Price High High Low Low High Low Low High Balance Surplus Balance Shortage Stabilizes Decreases Stabilizes Increases When there is a shortage, stores can raise prices and earn a greater profit. This is bad for consumers because they have to pay more. When there is a surplus, fewer people want the product being sold, so the store must drop the price in order to sell its stock. The store looses profit, but the consumer benefits because they pay less. Through this system of supply and demand, little government interference is necessary because markets stabilize themselves. • In the past, most people bought and sold things through barter. Barter is the direct exchange of goods and services. • Now money is used to get what people want rather than directly trading for it. • Through the exchange of money for goods and services, people are able to determine the value of what is being offered and pay exactly that amount rather than having to give or receive more or less than desired. Learn more about the evolution of the money system at: http://www.usmint.gov/about_the_mint/mint_history/ When you purchase something from someone, the price you pay for it is referred to as the item’s cost. However, the true cost is not just the money you paid for it, but also what you give up to get it. What is given up when an economic choice is made is known as the opportunity cost. • Every time you make any kind of decision, there is an opportunity cost. • When you consider the opportunity cost of a purchase, you are better able to make an informed decision and use your resources efficiently. Review Time! • • • • • • When there is a limited supply of something, there is scarcity. When there is greater supply than is needed, there is a surplus. Wants are luxuries. Needs are those things necessary for survival. When supply is high and demand is low, prices go down. When supply is low and demand is high, prices go up. The goal of supply and demand is for the two to balance, stabilizing prices. • Barter is the direct exchange of goods and services. • The money system is more reliable and efficient than barter. • Opportunity cost is the loss of an opportunity when you choose to do (or buy) something else. •