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