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Understanding Economics: Making Wise Choices in a World of Scarcity

Dive into the study of economics and learn how to make rational decisions in a world of limited resources. Explore the concepts of needs versus wants, trade-offs, opportunity cost, fixed and variable costs, and cost-benefit analysis. Discover your role in the economy and how your choices impact businesses in a market economy based on capitalism and free enterprise. By understanding economic principles, you can contribute to society by making wise choices that optimize the use of scarce resources.

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Understanding Economics: Making Wise Choices in a World of Scarcity

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Presentation Transcript

  1. What is economics?

  2. Economic choices • We are faced with choices because we do not have enough productive resources to satisfy all of our wants and needs.

  3. Economics: the study of how we make decisions in a world where resources are limited.

  4. Need or want? • Required for survival • Things we would like to have Needs Wants

  5. The fundamental economic problem is scarcity (when we do not have enough resources to produce all of the things we would like to have).

  6. Making economic decisions

  7. Trade-offs • Have to take all aspects of transactions into account • Ex: you trade money to buy a product

  8. Opportunity cost is the next best thing that you had to give up for the choice you made (includes money and inconveniences)

  9. Fixed costs do not change no matter how much is produced • Variable costs change w/the amount produced

  10. Fixed Costs + Variable Costs=Total Cost

  11. Marginal cost is the cost of producing one more unit of output. • Businesses look at total and marginal cost to determine final cost

  12. Cost-Benefit analysis • Econ. model that compares marginal costs and benefits • Benefits should outweigh the costs when making decisions

  13. Your role in the economy • U.S. has a market economy • Choices you make affect choices businesses make (like what to make or how much to charge)

  14. Market economies are based on capitalism and free enterprise • Incentives try to persuade people to make certain economic decision

  15. Making wise choices • Rational choice involves consumer’s perceptions • Benefits society by making the best use of scarce resources

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