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Ch. 1 Intro to Economics
What is economics?
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Enables you to make well informed decisions
To learn about earning, saving, investing, and spending.
To learn the differences between needs and wants
Needs are necessities (air, water, food, shelter) and they are
limited.
 Wants are desires (unlimited)
Definitions of Economics:
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Study of how people choose to use limited resources to
satisfy unlimited wants.
Scarcity:
1. Most basic economic problem
2. Not enough resources to satisfy wants
3. Must make choices
Examples of Scarce Resources in U.S.
1. Land:
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Being developed more and more
more land out of natural use
cities become urban islands with rising temperatures,
pollution, congestion, and crime
2. Petroleum (oil): OPEC- cartel that controls oil supply:
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Nonrenewable
prices depends on supply and demand
U.S. --$2.39--$2.50/gallon--$2.69
Europe--$8.67 per gallon and diesel is $11.50
higher prices lead to conservation and alternative vehicles
(50 miles/gallon)
3. Water:
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Renewable
pollution is a problem
cost of cleaning drinking water will continue to rise
4. Timbers:
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Renewable
using more than we are replacing
wood cost increases
substituting for wood
5. Minerals:
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Nonrenewable
Some are rare-give them intrinsic value. Value based on
scarcity
Ex: gold, silver, and platinum-more intrinsic value than iron and
copper
What are goods? Consumer goods and Capital goods
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have values
tangible
see, touch, show to others
What are services?
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Have value
Intangible
Cannot see, touch, show to others
Ex:
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Goods-paper, notebook, stereo, automobile
Services—medical care, teaching, bowling, watching a rented
movie, legal advice
To produce goods and services, a country needs the: Factors of
Production or Productive Resources (FOP’s)
1. Land (AKA Natural Resources)
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Nature is starting point of production
Successful nation must have natural resources
Questions:
Is the U.S. successful?
Is Saudi Arabia successful?
2. Capital (AKA Capital goods) capital resources
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tools, machines, factories, etc.
must be human-made
used to Produce goods and services
Question: Are robots labor or capital goods?
3. Labor (Human resources)
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must be human
must receive compensation
Price Floor:
Wages (per hour) $7.25
4. Entrepreneurship
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organizes other factors
1. managers
2. creators
3. risk takers
4. inventors
5. problem solvers
6. visionaries
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9 of 10 fail
American capitalist system of free enterprise allows them to
make the attempt at success.
1. H. Ross Perot
2. Sam Walton
3. Bill Gates
4. Wally Amos
5. Ted Turner
6. Ray Kroe
7. Donald Trump
8. Truett Cathy
9. Oprah Winfrey
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The situation in which some necessities have little value
while some non-necessities have a much higher value is
known as Paradox of Value
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Division of labor is a characteristic of assemble line
production
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The dollar value of all goods and services and the most
comprehensive measure of a country’s total production is
Gross Domestic Product (GDP)
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A popular model used to illustrate the concept of opportunity
cost is the Production Possibilities Frontier
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An economy at its production possibilities frontier is
operating at full potential
The money used to buy the tools and equipment needed for
production is known as financial capital
Actions in one part of country or world that have an
economic impact on what happens else where are examples of
economic interdependence
Microeconomics
1. study of large corporations
2. household
3. individual consumers
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Consumers choose what to buy
Food, Clothing, and Shelter are examples of human needs
Resources:
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Trees
Sunlight
Bicycles
Capital Goods:
1. Buildings
2. Structures
3. Machinery
4. Tools
When a car is used to deliver cakes, it is a Capital Good
Consumer Goods:
1. Finished products
2. The goods and services that people buy
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Technology often increases efficiency
The basic fact of economic life is scarcity
Money
1. Medium of exchange
2. Store of value
3. Measure of value
Identify the following:
Factor of ProductionCapital GoodServiceMoneyMacroeconomicsNatural resourcesSpecializationsOpportunity CostMicroeconomicsNeedConsumerProducersConsumer goodsLimited Resources-
Unlimited WantsSelf-sufficiencyEntrepreneurshipAllocateCreditWantEfficiencyGoodBarterCapital resourcesHuman resourcesUtilityProductivityDivision of laborTrade-offExchangeServices-