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Ch. 1 Intro to Economics What is economics? 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: 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: 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: 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: Renewable pollution is a problem cost of cleaning drinking water will continue to rise 4. Timbers: Renewable using more than we are replacing wood cost increases substituting for wood 5. Minerals: 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 have values tangible see, touch, show to others What are services? Have value Intangible Cannot see, touch, show to others Ex: 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) 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 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) must be human must receive compensation Price Floor: Wages (per hour) $7.25 4. Entrepreneurship organizes other factors 1. managers 2. creators 3. risk takers 4. inventors 5. problem solvers 6. visionaries 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 The situation in which some necessities have little value while some non-necessities have a much higher value is known as Paradox of Value Division of labor is a characteristic of assemble line production The dollar value of all goods and services and the most comprehensive measure of a country’s total production is Gross Domestic Product (GDP) A popular model used to illustrate the concept of opportunity cost is the Production Possibilities Frontier 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 Consumers choose what to buy Food, Clothing, and Shelter are examples of human needs Resources: 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 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-