What do all of these have in common?

What do all of these have in common?

How does this impact your decision to purchase the previous items??

Why can’t you purchase everything that you want??

The Economic Problem

Economic Problem (defined): “Although your wants, or desires, are virtually unlimited, the productive resources available to help satisfy these wants are scarce”.

Scarcity: Condition facing all societies because there are

not enough resources to satisfy human wants.- Not temporary condition

- Ongoing tension that confronts indiv’s, businesses, govt’s., and societies.

What is Economics??

• Economics: The study of how people choose to use scarce resources to satisfy their wants.

• Econ involves:

1) Examining how various groups handle the econ. Question

2) Organizing, analyzing, and interpreting data about these econ. Behaviors

3) Developing theories & econ. Laws- Explain how econ. Works & predict future trends

Why is Economics sometimes referred to as “The Dismal Science”??

Who makes Decisions??

• Wants: Desires that can be satisfied by consuming a good or a service.

• Needs: Things that are necessary for survival• Goods: Physical objects that can be purchased

(Tangible)• Services: Work that one person performs for another

for payment (Can be seen but not touched or held)

• There are 2 groups (each affected by scarcity)

1) Consumers: The people who buy goods & services for personal use

2) Producers: People who make goods or provide services

The 3 Basic Economic Questions

Brought about due to scarcity

1) What to produce?2) How to produce?3) For whom to produce?

The Factors of Production (Productive Resources)

F.O.P: The resources needed to produce goods and services.

1) Land- Natural resources found on or under the ground that are used to produce G’s & S’s

2) Labor- (Human) All of the time, effort, and talent used to make G’s & S’s

3) Capital- Finished goods used to produce other G’s & S’s (When businesses invest in real capital, workers invest in human capital)

4) Entrepreneurship: Vision, skills, & risk taking needed to create and run businesses.