ECON 1113 1st Edition Lecture 1Outline of Current Lecture I. The Basic Economic ProblemA. Two Economic FactsB. Economic ResourcesC. Scarce Economic Resources vs. Unlimited Material WantsCurrent LectureI. The Basic Economic ProblemA. TwoEconomic Facts1. Economic resources are scarce (or limited)2. Desires for particular types of goods and services (or materials) are effectively unlimitedB. Economic Resources1. Labor: human abilities to use and produce material goods and services2. Capital: human-made aids to productiona. Example: tools, machines, factories, transportation networks, etc.b. “goods used to produce other goods” are capital goodsc. Goods consumed by themselves are consumer goods3. Land: all natural resources useable in production; a function of technology4. Entrepreneurship: human resourcesa. Bring together other economic resourcesb. Bear riskc. Motivated by self-interest as expressed by a desire to maximize profitsd. Display an idea about how to maximize profiti. Good ideas: profitableii. Bad ideas: not profitable; example: rubber frying pans produce lossesC. Scarce Economic Resources vs. Unlimited Material Wants1. The limited resources satisfy the unlimited wants as best as possible2. People must make choices because resources are limited3. People unavoidably encourage cost of products and services when a choice is made4. Two Types of Costsa. Explicit (out-of-pocket) Cost: money spent when a choice is made (and cannot be spent on something else)These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.b. Implicit Cost: alternative foregone/sacrificed when a choice is made (but do not require out-of-pocket payments)c. Example: Cost of a College Educationi. Explicit Costs: money payments, tuition, food, room, board, books, fees, miscellaneousii. Implicit Costs: earnings if employed and not attending collegeiii. Special Circumstances of This Example: Wayman Tisdale – OU basketball playeri. Explicit Costs at OU = $0 (because of scholarships)ii. Implicit Costs as a professional basketball player = millions of dollars (playing in the NBA is more
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