Lecture 1Outline of Current Lecture I. Definition of EconomicsII. How Scarcity Relates to EconomicsA. Definition of ScarcityIII. Examples of Current ScarcityA. TimeB. MoneyIV. Pioneer of Economics: Adam Smith A. Definition of Division of LaborB. Definition of SpecializationC. Definition of Economies of ScaleCurrent LectureEconomics looks at how society manages and makes decisions during times of scarcity.Scarcity refers tohumans wanting more of a good or service than is available at a given time. People have to make decisions because of scarcity. Everything is scarce at some point in time. When the resources used to make goods and services are scarce, the goods and services become scarce as well. Scarcity is a problem because wants are insatiable, as well. There are many examples of goods that are scarce. On a campus there are limited numbers of parking spaces. Winter weather brings up the scarcity of road salt. There is a scarcity of raw materials, land, and tools. Labor and public spending are also an example of scarce items. Even if you had all the money in the world, time is an example of something that is scarce for everyone. Scarcity of time is something that everyone deals with. There are many ways to try and combat this scarcity by making various decisions. Planning ahead and making a schedule is one example. Making a list of priorities is another way. Finally, decisions can be made on how to maximize the amount of time that is available. All of these methods lead to a common goal, of increasing efficiency.Money is an example of a current scarce good in the world. People can make the decision to buy something on sale or to prioritize spending, to conserve this good. Making a budget and allocating available resources can also be a decision made when money is scarce. Adam Smith is often called the Father of Economics. His book The Wealth of Nations, published in 1776,changed the way economics was studied. He introduced the concept of Division of Labor to businesses. Division of Labor is when the production of a given good or service is broken down into different tasks done byAGEC 21700 1st Editionmany people. Adam Smith looked into how a pin was made by a single person. He noticed that this process could be divided into 18 distinct tasks. A modern example of this is the assembly line system used to make cars. Adam Smith also brought the concept of Specialization into businesses. Specialization is focusing on a specific job in the production process. Businesses today use these concepts that Adam Smith brought up centuries ago. Businesses want to increase efficiency. Specialization allows a worker to gain knowledge and experience in a certain job. This in turn allows the laborer to work faster. Faster work leads to lower cost in the production for the business. AdamSmith also introduced the concept of Economies of Scale. Economies of Scale is the concept that as the production scale number goes up, the average costs of production go down. All these methods go back to fighting the problem of
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