M R. B E RT RA N D T

UNIT #1~ SCARCITY

WHAT IS ECONOMICS?

• It is the study of choices people make to satisfy their needs or wants.

• Study of Economics is scarcity of resources vs. wants.

MICROECONOMICS• Choices made by individuals, households, or companies.

MACROECONOMICS• Examines behavior of entire economies. Example: Unemployment, the Stock Market or Natural Disasters.

TWO GROUPS OF ECONOMIC DECISION MAKERS

• Consumers – People who buy things.

• Producers – People who make things.

ECONOMIC CHOICESWhat types of things influence your economic choices?Needs~ Something you have to

have for survival.

Wants ~ Something above and beyond what is necessary for survival,

but is nice to have.

NEEDS AND WANTS FALL INTO 2 CATEGORIES

• Goods ~ physical product

• Services ~ Something that is done for you.

PRODUCT•A Product can be defined as both a good and service.

WHAT IS A RESOURCE?• People• Water• Books• Trees• Tools• Buildings• Oil• Computers• Library

RESOURCES FOR PRODUCTS

•Resources used for goods and services are known as factors of production.

FACTORS OF PRODUCTION

•Land/Natural Resources

•Labor/Human Resources

•Capital

•Entrepreneurship

LAND/NATURAL RESOURCES

•Anything that comes from the earth and is used in the production of a good or service. Examples: trees, water, oil, animals

LABOR/HUMAN RESOURCES

•Any physical or mental exertion used in the production of a good or service. Examples: farmers, plumbers, lawyers, doctors, teachers, seeing eye dogs, etc.

CAPITAL RESOURCES•Any manufactured or manmade item that is used in the production of another good or service. Examples: tools, vehicles, buildings, money.

ENTREPRENEURSHIP• The ability of a person to combine the other 3 factors of production to make a new good or service. Examples: Bill Gates, Donald Trump, Oprah Winfrey, Martha Stewart

THE 3 BASIC ECONOMIC QUESTIONS

WHAT TO PRODUCE?•What are a societies needs or wants? What is needed in communities by the people that live there? Market analysis, example: pizza places.

HOW TO PRODUCE?•What resources are used and how to use them. Example: If you are building a house, how many workers will be needed to do certain jobs, what types of tools and equipment will be needed, what resources or building materials would be needed.

FOR WHOM TO PRODUCE?

•Who is the target market of your product, how do you appeal to them, what medium is used, how will you distribute your goods to the consumer.

OTHER IMPORTANT VOCABULARY TERMS

MONEY•Money ~ is used as a standardized basis of exchange

CREDIT•Credit ~ allows a consumer to pay for an item over time

UTILITY•Utility ~ products usefulness to a person

SELF-SUFFICIENCY•Self-Sufficiency ~ the ability to fulfill all outside needs without outside assistance

INTERDEPENDENCE• Interdependence ~ the reliance among economic actors

BARTER•Barter ~ exchanging one set of goods for another

ALLOCATION•Allocation ~ the distribution of resources

TECHNOLOGY•Technology ~ the use of technical knowledge and methods to create new products

SPECIALIZATION•Specialization ~ allows workers to gain expertise in assigned tasks

DIVISION OF LABOR•Division of Labor ~ assigning a number of tasks to each worker

EFFICIENCY•Efficiency ~ smallest amount of resource, greatest amount of output

PRODUCTIVITY•Productivity ~ the amount of a good or service produced for each hour of work