What is economics?

SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.

a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.

What is Economics?The study of

production, distribution, and consumption of goods and services within a society.

It is the study of how people make choices and decisions with limited resources to satisfy wants, needs, and desires.

Why do we study economics?

Economics helps us learn how the world functions.

Economics helps guide us through our decision making processes.

Economics studies Needs vs. Wants

Scarcityfundamental

problem all societies face.

limited resources for unlimited wants.

3 requirements to be considered scarce:Must be desirableMust have a priceMust be limited

5 Key Economic Assumptions

Society’s wants are unlimited, but ALL resources are limited (scarcity).

Society = unlimited wants vs limited resources

5 Key Economic Assumptions

Due to scarcity, choices must be made.

Every choice has a cost (a trade-off).

5 Key Economic Assumptions

Everyone’s goal is to make choices that maximize their satisfaction.

Everyone acts in their own “self-interest.”

5 Key Economic Assumptions

Everyone acts rationally by comparing the marginal costs and marginal benefits of every choice.

Do the benefits outweigh the costs?

5 Key Economic Assumptions

Real-life situations can be explained and analyzed through simplified models and graphs.

Do YOU think like an Economist?

True or False?BECAUSE IT IS

DESIRABLE, SUNSHINE IS SCARCE.

True or False?BECAUSE IT IS

LIMITED, POLIO IS SCARCE.

True or False?

BECAUSE WATER COVERS THREE-FOURTHS OF THE EARTH’S

SURFACE, AND IS RENEWABLE, IT CANNOT BE CONSIDERED

SCARCE.

True or False?

THE MAIN COST OF GOING TO COLLEGE IS TUITION, ROOM AND

BOARD.

True or False?

IF PUBLIC TRANSPORTATION FARES ARE RAISED, ALMOST

EVERYONE WILL TAKE TRAINS ANYWAY.

True or False?YOU GET WHAT YOU

PAY FOR.

True or False?

IF SOMEONE MAKES AN ECONOMIC GAIN,

SOMEONE ELSE LOSES.

True or False?

IF ONE NATION PRODUCES EVERYTHING BETTER THAN

ANOTHER NATION, THERE IS NOT ECONOMIC REASON FOR

THESE TWO NATIONS TO TRADE.

True or False?

A NON-REGULATED MONOPOLY TENDS TO CHARGE THE HIGHEST

POSSIBLE PRICE.

True or False?

A BUSINESS OWNER’S DECISION TO SHOW MORE

CARE FOR CONSUMERS IS A DECISION TO ACCEPT LOWER

LEVELS OF PROFITS.