What is What is Economics?Economics?

Unit 1Unit 1

Ms StewartMs Stewart

Economics is about…Economics is about…

Trying to satisfy unlimited wantsTrying to satisfy unlimited wants Making tradeoffsMaking tradeoffs Getting the most out of what we haveGetting the most out of what we have

Link to clip: Link to clip: http://http://www.youtube.com/watch?vwww.youtube.com/watch?v==efSttefJiwQ&featureefSttefJiwQ&feature=related=related

““Wants”Wants”

The need or desire for goods and/or The need or desire for goods and/or servicesservices

They are UNLIMITEDThey are UNLIMITED

Divided into “Physical” wants and Divided into “Physical” wants and “Psychological” wants“Psychological” wants

““Physical” WantsPhysical” Wants

Also referred to as “Needs”Also referred to as “Needs” Things that are necessary to sustain Things that are necessary to sustain

human lifehuman life Examples: air, water, food, clothing, Examples: air, water, food, clothing,

sheltershelter Determined by where we live. (how?)Determined by where we live. (how?)

““Psychological” WantsPsychological” Wants

All other wants that are not essential All other wants that are not essential to sustaining lifeto sustaining life

Examples: ipods, brand name Examples: ipods, brand name clothing, a boat, trips, etc.clothing, a boat, trips, etc.

““Goods”Goods”

Tangible or “concrete” items that Tangible or “concrete” items that satisfy wantssatisfy wants

Examples: food, clothing, cars, etc.Examples: food, clothing, cars, etc.

““Services”Services”

Intangible items that satisfy wantsIntangible items that satisfy wants Consumed at the time of productionConsumed at the time of production

Examples: medical check-up, hair Examples: medical check-up, hair cut, concert, etc.cut, concert, etc.

““Resources”Resources”

Things used to produce goods and Things used to produce goods and services.services.

Divided into “Natural”, “Capital”, Divided into “Natural”, “Capital”, “Human” and “Entrepreneurial” Resources“Human” and “Entrepreneurial” Resources

They are LIMITEDThey are LIMITED

Link to clip: Link to clip: http://http://www.youtube.com/watch?vwww.youtube.com/watch?v==efSttefJiwQ&featureefSttefJiwQ&feature=related=related

““Natural Resources”Natural Resources”

Materials or substances that occur in Materials or substances that occur in nature and can be used for economic nature and can be used for economic gaingain

Examples: water, land, forests, Examples: water, land, forests, minerals, oil/gas, even sunlight and minerals, oil/gas, even sunlight and wind!wind!

““Capital Resources”Capital Resources”

A “good” that is used in the A “good” that is used in the production of other goodsproduction of other goods

Examples: factories, machinery, Examples: factories, machinery, equipment, toolsequipment, tools

““Human Resources”Human Resources”

The skills and efforts of people used The skills and efforts of people used in the production of goods.in the production of goods.

Example: employeesExample: employees

““Entrepreneurial Ability”Entrepreneurial Ability”

Someone who recognizes a profit Someone who recognizes a profit opportunity , is able to organize opportunity , is able to organize resources, and is willing to accept resources, and is willing to accept risk.risk.

Example: Hockey StickExample: Hockey Stick

Wood used to make the hockey stick = Wood used to make the hockey stick = Natural Resource Natural Resource

Saw used to cut the wood = Capital Saw used to cut the wood = Capital

ResourceResource

Person who operates the saw = Person who operates the saw =

Human ResourceHuman Resource

““Scarcity”Scarcity”

The core of EconomicsThe core of Economics Simply: because wants are unlimited Simply: because wants are unlimited

and resources are limited, there will and resources are limited, there will never be a time when all wants are never be a time when all wants are satisfied.satisfied.

There has to be “want” in order for There has to be “want” in order for scarcity to exist.scarcity to exist.

ExamplesExamples

Canned snow for sale in Antarctica = Canned snow for sale in Antarctica = no scarcity because no one would no scarcity because no one would want itwant it

Having $1.00 to buy lunch with = Having $1.00 to buy lunch with = scarcity because you probably won’t scarcity because you probably won’t be able to satisfy your hunger (want) be able to satisfy your hunger (want) with only $1.00 (resource)with only $1.00 (resource)

““Decision Making”Decision Making”

The act of dealing with the problem The act of dealing with the problem of scarcityof scarcity

Choosing the best way to satisfy the Choosing the best way to satisfy the most wants with our limited most wants with our limited resourcesresources

““Opportunity Cost”Opportunity Cost”

The benefit lost of choosingThe benefit lost of choosing The opportunity cost of an activity is The opportunity cost of an activity is

the value of the value of the next best the next best alternativealternative

ExampleExample

You need to chose between having a You need to chose between having a saladsalad, a , a sandwichsandwich, or a , or a bowl of soupbowl of soup for lunch.for lunch.

You You preferprefer salad over soup, but you salad over soup, but you prefer the sandwich most of all.prefer the sandwich most of all.

You You choosechoose the the sandwichsandwich, the , the opportunity costopportunity cost is…the is…the saladsalad (the next (the next best alternative)best alternative)

Economics is…Economics is…

The study of human activity involved The study of human activity involved in using scarce resources to satisfy in using scarce resources to satisfy wants.wants.