Download What Is Economics?

1
CHAPTER
WHAT IS
ECONOMICS?
ECONOMICS
The social science concerned
with the efficient use of scarce
resources to achieve the
maximum satisfaction of
economic wants.
ECONOMICS
The social science concerned
with the efficient use of scarce
resources to achieve the
maximum satisfaction of
economic wants.
WHY STUDY ECONOMICS
• Most __________ decisions involve
economics.
• An understanding of economics and
government are the keys to participatory
citizenship.
• Learn analytical and observational skills
that are important in the workplace.
• Business managers or owners need these
skills and understanding.
• Make better financial decisions with your
investments.
• Foundation for careers in accounting,
business, finance, marketing, or public
policy.
THE FOUNDATION OF
ECONOMICS
SOCIETY HAS VIRTUALLY
UNLIMITED WANTS...
THE FOUNDATION OF
ECONOMICS
SOCIETY HAS VIRTUALLY
UNLIMITED WANTS...
BUT LIMITED OR SCARCE
RESOURCES!
GOODS & SERVICES PROVIDE...
UTILITY
GOODS & SERVICES PROVIDE...
UTILITY
WANT
GOODS & SERVICES PROVIDE...
UTILITY
WANT vs. NEED
THE ECONOMIC WAY OF THINKING
Scarcity
The world has limited resources.
These resources are desirable.
TINSTAAFL
There is no such thing as a free
lunch
WHAT IS THE DIFFERENCE
BETWEEN A TRADE-OFF AND
OPPORTUNITY COST?
Trade-Off
An exchange of
one or more
thing(s) in return
for another.
Opportunity Cost
The value of the
next-highest valued
alternative or the
forgone cost.
WHAT IS THE DIFFERENCE
BETWEEN A TRADE-OFF AND
OPPORTUNITY COST?
Trade-Off
An exchange of
one or more
thing(s) in return
for another.
Opportunity Cost
The cost of passing
up the next best
choice.
FRIDAY NIGHT OPTIONS
Go out with friends
Stay home and watch TV
Go on a date
Study economics
Attend the basketball game
The one we pick is our choice, the rest
become Trade-offs.
The “next best” alternative becomes the
Opportunity Cost.
FRIDAY NIGHT OPTIONS
Go out with friends
The one we pick is our choice, the rest
become Trade-offs.
The “next best” alternative becomes the
Opportunity Cost.
GO OUT ON A DATE
The Opportunity Cost of going out on a date is what you’ve lost by not going out with
friends.
 Excitement
 Fun
Your decision was based on getting more utility on your date.
That’s the “incentive”
ANY OTHER COSTS?
Dating is expensive. Let’s say you spend $30. You could have spent that
$30 on something else.
SO OUR OPPORTUNITY COST IS…?
The lost fun you would have had
with your friends.
The cash you spent on your date.