Economics The Study of how people seek to satisfy their wants and needs by making choices.

Economics

The Study of how people seek to satisfy their wants and needs by

making choices

Needs and Wants

• Anything you need for survival- air, food, water

• An item we desire that is not essential to our survival

Scarcity

• Implies limited quantities of resources to meet unlimited wants

• It will always be this way

Shortage

• A shortage occurs when producers will not or cannot offer goods or services at the current prices

• Temporary or long-term• Wars and droughts can

create them- our water shortage for example

Oil Embargo of 1973-74

• In 1973 Syria and Egypt attack Israel, changing the rules for post-WWII international relations. Because we supported Israel, Opaec placed a ban on us and the Netherlands and later Portugal, South Africa and Rhodesia.

• People had to stand in line for gas-

Factors of Production

• Land- Natural Resources

• Labor- the efforts needed to create anything for which a person gets paid

• Capital- a human- made resource that is used to produce other goods or services

Physical Capital

• Human-made objects used to create other goods and services

• This can be machines or buildings or other tools

Human Capital

• The knowledge and skills a worker gains through education, experience and training.

Entrepreneur

• People who put the factors for production together

• They develop new ideas and figure out what people want

• You don’t have to develop Microsoft to be an entrepreneur

Trade-offs

• Individuals, businesses, large groups of people and even governments make decisions that force us to give up something in favor of another…..give some examples of individual trade-offs

Opportunity Cost

• When making a decision in a trade-off, the most desirable alternative is usually given up to be responsible, more convenient or helpful.

• For example: You have two options- sleeping in late in the A/M and rushing to school to take a test or waking up early to study before you get to school. Studying in the a/m would improve your grade on the test

Karen’s choice

• Karen had that dilemma. She decided to make a decision making grid. These grids are obviously made for important decisions.

• This called the all or nothing approach

Thinking at the margin

• There are alternatives to the all or nothing approach. You could sacrifice some sleep but accept consequences