economics 1. what is economics? it is the study of how people make decisions in a world where...
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Economics
1. What is economics?
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It is the study of how people make decisions in a world where resources are limited: the science of decision making.
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2. People have needs that are required for survival such as:
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•Food •Clothing
•Shelter
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3. People also have many wants: things that make life for comfortable.
Such as:
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•Entertainment
•Vacations
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4. The basic economic problem is:
SCARCITY
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When there are not enough resources to produce all the things people would like to have.
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Because of scarcity, society must make three economic decisions:
1) What to produce?
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2) How should goods and services be produced?
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3) For Whom should they be produced?
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Goods: tangible items such as -
•shoes
• cars
•roads
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Services: what people DO for someone in exchange for something of value. Such as:
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•mechanic
•maid
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Resources:
1. Natural Resources: come from the earth:
water
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soil trees
minerals
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2. Human resources:Skills Knowledge
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energy Physical capabilities
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What should be produced?
During wartime metal may be used for weapons instead of pots and pans.
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Farmers may be used as soldiers resulting in less food production.
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2. How should they be produced?
Which natural resources should be used to build a road?
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dirt cement
gravel
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Should we allow more pollution in exchange for greater output and cheaper prices?
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3. For whom to produce?
This deals with the distribution of goods and services.
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In the U.S. people who make the most money are able to buy the most goods and services.
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Choices involve trade-offs:
Exchange one thing for the use of another.Pots & pans/ tanksFarmers/ soldiers
Clean air/ cheap prices
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Opportunity cost – The next best alternative you had to give up for a choice you made.
skiing
homeworkconcert
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To make economic decisions, people have to take into account all the costs and benefits of an action.