INTRO TO ECONOMICS

What is economics??

Efficient use of scarce resources Study of how individuals and

society, experiencing limitless wants, choose to allocate its scarce resources.

What do people Want/Desire??

EVERYTHING! ALWAYS!

Economic Questions

Scarcity= Limited resources v unlimited wants

3 economic questions1. What to produce?2. How to produce it?3. For whom?

Why Study Economics?

We have unlimited wants in a world of scarce resources

Econ focuses on the best use of scarce resources Scarcity causes Opportunity Costs:

Opportunity cost Forgo something to get the other “Cost of doing business” Sleep v. study

5 Factors of Production

1. Land: All natural resources

2. Labor: Human work

3. Capital: All human-made means of production

4. Technology: Innovation and Design

5. Entrepreneurs: Risk takers, business owners, inventors, etc.

Economic Systems

What are “economic systems” Institutions who determine, who,

what, where to produce

1. Traditional System: Solves the economic problems

through custom and tradition What to Produce: Past habits How to produce: not efficient

—old habits For Whom?: Strict rules/social

classes/communally

2. Command System

Solves economic problems through government authority What to produce: Determined

by Gov. & authority How to produce: Determined

by Gov. & Authority For Whom: Determined by

Gov. & Authority

Examples: Cuba, Former Soviet Union, North Korea

3. Market System

Solves economic problem answered through Supply and Demand

**System is driven by making profits** What to Produce: What

makes $$ How: What ever

maximizes $$ For Whom: Whoever

wants to pay

Capitalism

System where the Individual not the government makes decisions

Basic Freedoms of Capitalism

1. Free enterprise: Freedom to start and operate own business

2. Private Property: Right to own

3. Freedom of Choice—Choose between goods and services