What is Economics? TEKS/Notes

UNIT 2

Scarcity & Choice • Fundamental Economic

Problem facing all societies is scarcity- society not having enough resources to produce all the things people want

• Unlimited Wants and Limited Resources force societies and individuals to make choices

• Basic Economic Questions

Each society must answer three basic questions

• 1. What to Produce?-military equipment, food, clothing or housing

• 2. How to produce?- Mass production or high labor

• 3. For whom to produce?- who gets what

Required to Produce the Things We Want or Need

Trade Offs-Alternatives given up when one option is chosen rather than another.-An exchange of one thing in return for another.

Opportunity Cost Cost of the next best

alternative use of money, time, or resources when one choice is made over another

• A diagram representing various combinations of goods and /or services an economy can produce when all production resources are fully employed (P. 123 Figure 1.6)

Production Possibilities Curve

Production Possibility Frontier Curve