Introduction to Economics

Chapter 18

Quiz 18

1. ____ is the study of how people satisfy unlimited wants & needs with limited resources.

2. ____ is basic problem of economics.List the 3 basic economic questions: (3-5)6. Rent is an example of a ___ cost in a business.7. T/F Economic models are always reliable.8. T/F Some trade-offs have no opportunity costs.9. T/F All people have their basic needs met.10. T/F Most teenagers satisfy wants with their money.

What is Economics?

• The study of how people satisfy unlimited wants and needs with limited resources.

• Why is “decision science” a good name for economics?

• Why can’t we have it all????– Does everyone make choices?– Why?

• SCARCITY: Lack of a resource

Goods versus Services

• Goods are tangible items sold for a fee

EXAMPLES

• Services are work performed for a fee

EXAMPLES

The 3 Basic Economic Questions

• What to produce? (What to make?)– Availability– Profitability

• How to produce? (How to make g/s?)– Efficiency– Better, cheaper, faster

• For whom to produce? (Who gets g/s?)– Deserving– Affordability

Revenue & Costs

• What are fixed costs? Examples?• What are variable costs? Examples?• TOGETHER, these equal the total costs.• What are marginal costs? Example?• What is revenue? Give examples.• Why do businesses fail?

“You can’t always get what you want”

• What is a trade-off? Give an example.• What is an opportunity cost? Give the answer

from the above example.• How do opportunity costs play out in the real

world? • How do budgets affect trade-offs and their

resulting opportunity costs?• Do activity, discuss and award prizes.

How to make good decisions?

• Cost-Benefit analysis• Do example.

Read 19.1 and complete chart and questions.