Economic Way of Thinking. Scarcity. The condition that results from society not having enough resources to produce all the things people would like to have. Scarcity Qualifications. 1. Limited in quantity 2. Be desirable 3. Have more than one valuable use. Everything has a cost!.
Economic Way of Thinking
The condition that results from society not having enough resources to produce all the things people would like to have.
1. Limited in quantity
2. Be desirable
3. Have more than one valuable use
Everything has a cost!
No such thing as a Free Lunch!
People choose for good reasons!
Cost and Benefits
Different Values = Different Choices
Rent control in New York
Supply and Demand
People create economic systems to influence choices and incentives
Market vs Command Economies
As rules change incentives and behavior change
People gain from voluntary trade.
Makes them better off
No benefit = no trade
Economics is about trade!
Economic thinking is marginal thinking.
Marginal choices involve the effects of additions and subtractions
The value of a good or service is affected by people’s choices.
Value is determined by the preferences of buyers and sellers
Economic actions create secondary effects.
Rent controls make apartments more affordable to some.
Less profitable to build and maintain. (Friends)
The test of a theory is its ability to predict correctly.
It the theory correctly predicts the consequences of actions, it is a good theory!
Proof is in the pudding!
So what is Economics?
Economics is the study of how people satisfy wants with scarce resources
There Is No Such Thing As FREE Lunch!
Buy one, Get one Free
Three questions MUST be answered b/c of limited resources
WHAT to produce
HOW to produce
FOR WHOM to produce
Factors of Production
Basic Economic Concepts
Work that is preformed for someone
Intangible: cannot be touched
Person who uses goods and services to satisfy wants and needs
Value, Utility, and Wealth
Value refers to a worth that can be expressed in dollars and cents
The Circular Flow of Economics