1. HOW PEOPLE USE LIMITED RESOURCES TO SATISFY UNLIMITED WANTS
ECONOMICS
SHOW ME THE MONEY!
Culturally - How do people survive, or earn a living?
DEFINITION:
HOW PEOPLE USE LIMITED RESOURCES TO SATISFY UNLIMITED WANTS

2. SCARCITY -the basic concept
WHAT DOES LIMITED MEAN?
scarce – “not plentiful, rarely seen”?
A resource that has a finite supply and provides a valuable use
A resource with alternative or competing valuable uses

3. My practice jersey

4. 3 BASIC ECONOMIC QUESTIONS

5. 1. WHAT GOODS AND SERVICES ARE PRODUCED?
ANSWERS “consumption”
What resources are available (Supply) social cost
What technology is available (Supply) social cost
What do people want* (Demand) social benefit
What they see and know
DEFINITIONS
Goods – products or commodities,
Physical or tangible
Services – actions or activities
Provided, Cannot be resold

6. 2. How should they be produced and in what quantity?
Answers “Production”
Determined by the “economic system”
Limited by the factors of production
Land: natural resources
Labor: human input – sweat and/or brains
Capital: resources (tools) made or used by humans
Entrepreneurship: individual willingness to take risk; to invent, to innovate, to organize

7. 3. FOR WHOM SHALL THEY BE PRODUCED?
Answers: “Distribution”
Who gets what, and how much
and how do they get it? (how is it allocated)
Social/Political Organization

8. Traditional Economy Closely tied to the environment
Choices and Social roles determined by
Custom
Belief system
Status
Birth
Family
Gender

9. BASIC ECONOMIC REASONING
1. People make choices
2. The choices people make have costs
3. People respond to incentives in predictable ways
4. People create economic systems that influence individual choices and incentives
5. People gain when they trade voluntarily
6. People’s choices have consequences that lie in the future

10. 1. People make choices People face tradeoffs economize
People choose the alternative that seems best to them, because it involves the least cost and the greatest benefit
People economize by selecting the best combination of costs and benefits

11. 2. The choices people make have costs
Opportunity cost
The cost of something is what you give up to get it
Alternative forgone
Cost is the second best choice people give up when they make their best choice

12. 3. People respond to incentives
Incentives are actions or rewards that encourage people to act. When incentives change, peoples behavior changes in predictable ways
Rational decision-making

13. 4. People create economic systems that influence individual choices and incentives
How people cooperate is governed by written and unwritten rules. As rules change, incentives change and behavior changes
Traditional
Closely tied to the environment
Choices and Social roles determined
by Custom, belief system, birth, family gender
Market
Markets are usually a good [most efficient] way to organize economic activity
Command / Planned : addresses
Income inequality, redistribution of wealth requires government control
Mixed
Governments can sometimes improve market outcomes

14. 5. People gain when they trade voluntarily
Trade can make everyone better off
Voluntary trade creates wealth
People can produce more in less time by concentrating on what they do best.
The surplus goods or services they produce can be traded to obtain other valuable goods or services

15. 6. People’s choices have consequences that lie in the future
Choices are made on the anticipated benefit compared to present circumstances
The important costs and benefits in economic decision making are those which will appear in the future.
Economics stresses making decisions about the future because it is only the future that we can influence. We cannot influence things that have happened in the past.