Slide 1Slide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Slide 11Slide 12Slide 13Slide 14Slide 15Slide 16Slide 17Slide 18Slide 19Slide 20Slide 21Slide 22Slide 23Slide 24Slide 25Slide 26Slide 27Slide 28EconomicsThe study of how scarce, or limited resources are used to satisfy people’s unlimited material wants and needs. How people make decisions in a world of scarcity.ScarcityThere are not enough, nor can there ever be enough, goods and services to satisfy the wants and needs of all individuals, families, and societies.Unlimited wantsLimited resources to satisfy wantsChoose between alternativesScarce GoodsFood (bread, milk, meat, eggs, vegetables, coffee, etc.) Clothing (shirts, pants, blouses, shoes, socks, coats, sweaters, etc.) Household (tables, chairs, rugs, beds, goods dressers, television sets, etc.) Space exploration Education National defense Recreation Leisure time Entertainment Clean air Pleasant (trees, lakes, rivers, environment open spaces, etc.) Pleasant working conditions Limited ResourcesLand (various degrees of fertility) Natural (rivers, trees, minerals, Resources oceans, etc.) Machines and other human-made physical resources Non-human animal resources Technology (physical and scientific “recipes” of history) Human (the knowledge, skill, resources and talent of individuals)Scarcity and ChoiceTradeoffsChoices involve tradeoffs and consequences. - give up to getIt involves a value judgment. - decide the relative importance of alternativesOpportunity CostInvolves evaluating the costs and benefits of choices. What must be given up to get one more unit of another good or serviceThere is no such thing as a free lunch.It also means doing the job they were trained or designed to doProductive EfficiencyGoods and services are produced at the lowest cost.orEquityShould people receive based on their relative need for the goods and services?Should every person receives as much as every other person?orShould people be rewarded for their contribution to the production?Factors of Production1. 2.3.4.LandLaborCapitalEntrepreneurshipPayment to Factors1. 2.3.4.RentWages and SalariesInterestProfits1. Determining variables to studyDeveloping Economic TheoriesPricesIncomesAge groupsPopulationGovernment actionsIndependent vs Dependent -Methods2. Make Assumptionseg. Ceteris Paribus (other things being equal) - only consider changes to one variablelike Pricesee Independent variables a little laterDATA3. Gather data4. Study the data“Need facts to support theories and theories to make sense of facts.”a. InductiveUse facts to develop a modelTake a survey and study the resultsb. DeductiveSee if the facts support a hypothesisStart with a theory and see if facts support it5. Make Conclusiona. Principle - relationshipb. Theory – string of principlesc. Law –theory proven to hold true most timesCONCLUSIONSpolicy6. Set a Policy.The cause of most disagreement1. As a theory or law.The Law of DemandAs the price of a good rises, the quantity people will want to buy (demand) will fall.Presenting resultsThe Law of SupplyAs the price of a good rises, the quantity producers will want to sell (supply) will rise.Illustrating the relationship between 2 variables Eg. Price and Quantity2. As a picture.Presenting resultsSelling Quantity Price Demanded$ 3$ 2$ 1$ 41025406015$ 5PriceQuantity$6$5$4$3$2$110 20 30 4050600DemandDownsloping left-Plot the pointsGraphing:-Connect the dotsto rightDemand2. Dependent Variable - Quantity, workers, - X axis1. Independent Variable - Price, wages, $$$$$ - Y axisEconomic graphs2. Inverse Relationship - Graph slopes down from left to right1. Direct Relationship - Graph slopes up from left to right Economic graphs1.All resources are fixed in quantity2.All resources are fully employed3.Existing technology is fixed.4.You have a choice of 2 goods to produceProduction possibilitiesAssumptionsPizzas (10,000) 0 1 2 3 4Road Pavers 10 9 7 4 0Production possibilitiesTableOpportunity Costs?Result of combination: A- B- C- D-Production possibilitiesCurve (or Frontier)Road PaversCapital goodPizzaConsumer good109741 2 3 40BADCFuture GrowthLess GrowthUnemploymentUse up resources1. When an economist states that a good is scarce, he means that:a. Production cannot expand the availability of the good.b. It is rare.c. Desire for the good exceeds the amount that is freely available from nature.d. People would want to purchase more of the good at any price.2. The highest valued alternative that must be given up in order to choose an action is called itsa. opportunity cost.b. utilityc. scarcityd. ceteris