Transcript File

Economics
“The Basics of
Economics”
Part I:
The Basic Terms of
Economics
People in Economics
►
In any society, there are
two major players in
economics.
 producer – maker and/or
seller of goods and
services
 consumer – buyer and/or
user of goods and
services (everyone is a
consumer)
Needs vs. Wants
►needs
– something humans
require for survival (food,
water, clothing, shelter)
►wants – something desired,
beyond what is required for
survival (IPOD, cell phone)
Goods vs. Services
►good
– any manufactured
product
 ex. food, shoes, or TVs
►service – work done for others
 ex. police, restaurants, doctors,
beauticians, teachers
Scarcity
►a
shortage of goods or services
 In any society, there is never enough of
everything to satisfy everyone’s wants
and needs.
 Unlimited wants and limited resources
force choices.
 Individuals, businesses, and governments
all make choices due to scarcity.
Scarcity in Developed Nations
►insufficient
domestic
petroleum
►lack of raw materials
►unfavorable balance of
trade (more imports
than exports)
Scarcity in
Underdeveloped Nations
► not
enough farmland, water, and food
► lack of medical personnel, supplies, and
facilities
► lack of transportation for goods
► lack of building materials
► lack of employment
► lack of capital for investment
► lack of education
Allocation of Resources
deciding who gets what resource
because people’s wants exceed the
available resource resulting in scarcity
► opportunity cost –
something that is given
up when something else
is chosen
►
Economic Decisions
► Producers
in an economy must make basic
economic decisions.
 What to produce?
 How to produce?
 For whom to produce?
Law of Supply and Demand
► supply
– the amount of a good or service available
for sale in a market
► demand – the amount of a good or service wanted
in a market
► When supply is up and demand is down,
prices go down.
► When supply is down
and demand is up,
prices go up.
Part II
Resources: The
Factors of Production
Productive Resources
► availability
of these
impacts the economic
decisions
► four major categories:
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natural
human
capital (goods and human)
entrepreneurship
Natural Resources
► includes
the sun,
wind, water,
oceans, rivers, gifts
of nature, and
mineral resources
available in an area
Human Resources
► labor
 people with
talent,
knowledge, and
skills
Capital Goods
► Capital
tools.
goods are the
 These are things that
have been produced by
past efforts of people
that are used in
production of goods
and services.
 Examples include:
tools, equipment,
buildings, machinery,
and factories.
► This
is not money!
 Money is NOT a
resource; money is a
means or medium of
exchange.
 Money is not worth
anything by itself.
Its value is for what
we can exchange the
money.
Human Capital
► Investing
in human capital involves training &
education.
► If you improve people skills, then they will be
more productive.
► People with more education will earn more.
► Teachers are investing in human capital.
Entrepreneurship
►
ability and
willingness to
see an
opportunity to
make a profit
by making and
selling a
good or
service the willingness to risk
capital
►
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►
entrepreneur – person who risks
capital to produce a good or
service
investor – person who provides
capital to an entrepreneur
middleman – a trader who buys
goods from the producer and, in
turn, sells the goods to another
seller or sells directly to the
consumer for profit (involves
mark up in price to consumer at
each exchange)
Opportunity Recognition
► Entrepreneurs
must recognize an unmet
demand in the economy and try to meet it.
► This involves risk taking.
 China – people grow rice in flooded fields, in
which they also raise fish to sell
 Truett Cathy - Chick-fil-a
Technology
►Advancements
in
technology have
led to higher
productivity and a
higher standard of
living.
Examples of Technology
►the
wheel
►irrigation
►hydroelectric power
►automobiles
►telephones
►computers
Economics
Wants > Resources
Scarcity
Decision Making
Personal
What we do
Type of Job
Societal
Where we live
Economic System
How to allocate resources
Governement System
Spend Tax dollars
PERSONAL FINANCE
► Financial
planning for individuals. Generally,
it involves analyzing their current financial
position, predicting short-term and longterm needs, and recommending a financial
strategy. The financial strategy involves
setting a budget and planning for future
needs and wants.
INCOME
►
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The monetary payment received for good or services, or
from other sources, as rents or investments.
Income is money that literally “comes in” on a regular
basis. For most people, income is something that comes
from getting paid for doing work. Some people, however,
are able to live off from their savings or investments.
Income may also come from gifts or from selling
something.
Spending
►
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to pay out, disburse, or expend;
dispose of (money, wealth,
resources, etc.):
Money is needed for food,
shelter, and clothing. Of course,
people spend money on things
they want, too.
Things that we want but do not
need are called luxuries.
The best way to spend money
wisely is to make a BUDGET,
which is a plan for how much
money will be spent on each
type of item that person must
buy.
SAVINGS
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1 Goal of BUDGETING is to save money.
Saving allows people to plan to buy some expensive in the
future.
Many different ways to save money. EX. Piggy bank, not
necessarily safe.
Best way of saving money is to put it in bank.
By saving in a bank, your money can earn interest. Interest is a
charge that the bank pays you to use your money.
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CREDIT
When savings and income are not enough to pay for what a person
wants or needs, he or she can use credit.
Credit is money that you borrow from a bank.
When you let the bank use your money, that bank pays you interest.
When you use the bank’s money, you then must pay the bank interest
There are many different types of CREDIT, credit cards, home loans,
and car loans.
Anytime money is owed, credit is extended.
The key to personal finance is never to borrow more than you can pay
off in a reasonable amount of time.
Investment
the investing of money or
capital in order to gain
profitable returns, as
interest, income, or
appreciation in value.
► Investing is spending money
in the hope of earning more
money than is spent.
► EX. Collectable trading cards.
A card that is bought for a $1
may someday be worth $10.
A return of $9- which is
900%
►
INVESTMENT
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the investing of money or capital in order to gain profitable returns, as
interest, income, or appreciation in value.
Investing is spending money in the hope of earning more money than
is spent.
EX. Collectable trading cards. A card that is bought for a $1 may
someday be worth $10. A return of $9- which is 900%
EX. Honus Wagoner card in 1909 cost less than .50 cents this year it
sold for 2.35 million dollars.