WHAT IS ECONOMICS? 1 C H A P T E R ECONOMICS The social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction.

WHAT IS ECONOMICS?

1C H A P T E R

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 VIRTUALLYUNLIMITED WANTS...

BUT LIMITED OR SCARCERESOURCES!

SOCIETY HAS VIRTUALLYUNLIMITED WANTS...

THE FOUNDATION OF ECONOMICS

GOODS & SERVICES PROVIDE...

UTILITY

WANT

GOODS & SERVICES PROVIDE...

UTILITY

WANT vs. NEED

GOODS & SERVICES PROVIDE...

UTILITY

THE ECONOMIC WAY OF THINKING

ScarcityThe 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.