Economics Ch. 1 Introduction:

Economic Way of Thinking 1.1

Economics—A study of choices; Choices that people make in order to satisfy their needs and wants.

Economist—Collects information about the economy and studies the choices that people make.

Types of Economics 1.1 Two Types of Economics:

Microeconomics—Study of choices made by households, companies, and individual markets.

Ex. Buying habits of people under 25 years old See the trees in the forest

Macroeconomics—Study of entire economies.

Ex. Unemployment in the U.S. See the whole forest

Why Study Economics? 1.1 Why? Helps people take advantage of the

opportunities available to them and make wise choices about how to spend and invest their money and time. Unlimited wants and needs/limited resources Where to eat lunch? Where to go to college? What career to choose?

Who Makes Economic Decisions?

YOU DO! Consumers—the people who decide to buy things.

(Choose what to buy) (Demanders) Producers—the people who make the things that

satisfy consumers needs and wants.(Choose what to provide and how to provide it.) (Suppliers)

This network of decisions is the basis for all economic decisions.

How do we make economic decisions? 1.1 Based on your needs and wants for goods

and services. Needs—necessary for survival; food, shelter,

clothing. Wants—What consumers buy beyond what is

necessary; Ex. Magazines, CD’s, TV’s,

Economic Resources 1.1 Goods—Physical objects that can be

purchased—Pizza, bicycle, shoes, etc. Services—Actions or activities that are

performed for a fee; Ex. Lawyers, doctors, teachers, plumbers, home builders, etc.

Factors of Production 1.1 Economic Resources—Anything that people

use to make or obtain what they need or want.

Factors of Production—Resources that can be used to produce goods and services. Any product that we buy or sell must have the

4 factors of production in order to make their products; (from pizza to space shuttles.)

Factors of Production: 1. Natural Resources—Found on/in the

earth; Ex. Farmland, oil, coal, sunlight, wind, rain, etc. (Must be scarce and paid for to qualify.)

Air on the beach? Scuba diving air?

Factors of Production: 2. Human Resources—Any human effort exerted

during production. (Physical or intellectual(. Assembly line workers, store clerks, engineers, ministers, etc.

3. Capital Resources—Manufactured materials used to create products. Money is a capital resource. Capital goods—are the buildings, structures,

machinery, equipment, tools, used in the production process.

Factors of ProductionConsumer Goods—The finished products that people

buy. Technology—is the use of technical knowledge and

methods to create new products or make existing products more efficiently.

Factors of Production 4. Entrepreneurship—The organizational abilities

and risk taking involved in starting a new business or introducing a new product. Entrepreneur—is a person who attempts to start a

new business or introduce a new product—risking economic failure in return for the possibility of financial gain.

Ex. Michael Dell—1985; 1996 $5Billion Ex. Mary Kay Ash—Cosmetics Ex. Sam Walton---Wal-Mart; starting selling eggs Your name?????

Daily Assignment:

Scenario: You own a single pizza restaurant. Create a Tree Map that demonstrates your

understanding of the four factors of production by identifying and classifying as many factors as you can think of under each of the four factors of production.