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Unit 1: Basic Economic Concepts

Unit 1: Basic Economic Concepts. “Econ, Econ”. Econ. Economic Terminology. Utility =. Satisfaction!. Marginal =. Additional!. Allocate =. Distribute!. Scarcity occurs at all times for all goods. Scarcity vs. Shortages.

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Unit 1: Basic Economic Concepts

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  1. Unit 1: Basic Economic Concepts “Econ, Econ” Econ

  2. Economic Terminology Utility = Satisfaction! Marginal = Additional! Allocate = Distribute!

  3. Scarcity occurs at all times for all goods. Scarcity vs. Shortages • Shortagesoccur when producers will not or cannot offer goods or services at current prices. Shortages are temporary. Price vs. Cost What’s the price? vs. How much does that cost? Price= Amount buyer (or consumer) pays Cost= Amount seller pays to produce a good Investment Investment= the money spent by BUSINESSES to improve their production Ex: $1,000 new computer, $1 Million new factory

  4. Goods vs. Services Give examples… Goods= physical objects that satisfy needs and wants • Consumer Goods- created for direct consumption (example: pizza) • Capital Goods- created for indirect consumption (oven, blenders, knives, etc.) • Goods used to make consumer goods Services= actions or activities that one person performs for another (teaching, cleaning, cooking)

  5. Accountants vs. Economists Accountants look at only EXPLICIT COSTS. • Explicit costs are the traditional “out-of pocket costs” of decision making. • Ex: Going to Disneyland Economists look at the EXPLICIT COSTS and the IMPLICIT COSTS. • Implicit costs are the opportunity costs such as forgone time and forgone income. • Ex: Peyton Manning leaves the NFL to open a taco shop.

  6. The 4 Factors of Production

  7. The Four Factors of Production • Producing goods and services requires the use of resources- DUH!. • ALL resources can be classified as one of the following four factors of production: Land Labor Capital Entrepreneurship

  8. The Four Factors of Production Land= All natural resources that are used to produce goods and services. Anything that comes from “mother nature.” (Water, Sun, Plants, Oil, Trees, Stone, Animals, etc.) Labor = Any effort a person devotes to a task for which that person is paid. (manual laborers, lawyers, doctors, teachers, waiters, etc.)

  9. The Four Factors of Production Two Types of Capital: 1. Physical Capital- Any human-made resource that is used to create other goods and services (tools, tractors, machinery, buildings, factories, etc.) 2. Human Capital- Any skills or knowledge gained by a worker through education and experience (college degrees, vocational training, etc.)

  10. Program for International Student Assessment (PISA) is a worldwide evaluation of 15-year-old school children's scholastic performance

  11. The Four Factors of Production • Entrepreneurship= ambitious leaders that combine the other factors of production to create goods and services. • Examples-Henry Ford, Bill Gates, Inventors, Store Owners, etc. Entrepreneurs: • Take The Initiative • Innovate • Act as the Risk Bearers So they can obtain _________. PROFIT Profit=Revenue - Costs

  12. The Factors of Production

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