Chp. 1: What Is Economics?. The study of economics begins with the idea that people cannot have everything that they need or want. ECONOMICS. The study of how people make choices – utilizing limited resources – to satisfy their needs and wants Why must people make such choices?
The study of how people make choices – utilizing limited resources – to satisfy their needs and wants
Why must people make such choices?
The reason is SCARCITY.
Why might an economist look at hundreds of cars moving along an assembly line and say, “There is an example of scarcity”?
A shortage occurs when a good or a service is unavailable, when people have trouble supplying goods and services at current prices.
…the failed economic policies of government
Others last a long time.
(exs. : buildings, tools, machines, etc.)
The knowledge and skills people have learned and then put to use creating goods and services are called
human capital.(3) CAPITAL – a human-made resource used to produce another good or service
People who combine land, labor, and capital to invent a new product, create a new business, or come up with a new way of doing something.
…take risks to develop original ideas
…create new industries
…fuel economic growth
…create jobs for others
(The light bulb, the electrical grid, motion picture cameras and projectors, recorded
sound on a disc, and a lot more…)
(The most popular board game in the world –
Monopoly!)Some important American entrepreneurs:
(The safety razor)
(“Famous Amos” cookies)
(First great female entrepreneur in the U.S. – Pepperidge Farm bakeries)
(Publisher of “Jet” and “Ebony” magazines,
founder of BET network)
(The artificial pacemaker)
(“The Lady and Sons restaurant – Savannah, Ga.; Food Network star; publisher)
(Television host, media mogul, philanthropist, Academy Award – nominated actress,
influential book critic, magazine publisher)
(President and Founder of WeCareMD
in Hiram, Georgia,
takes the land, labor, and capital
and creates something new!
Which factor of production is represented by each of the following?
(B) An assembly line worker
(C) A tree used to make paper
(D) Unused soil
(E) An artist
(F) A student
Every day of our lives are filled with choices, from the moment we open our eyes in the morning until the moment we close them again in sleep at night.
That is a trade-off.
The value of the most desirable alternative given up is called the opportunity cost.
Suppose you have to choose between sleeping late and getting up early to study for a test.
The opportunity cost of more study time is less sleep.
The opportunity cost of more sleep is less study time.
1st hour extra study “C’ grade 1 hour of sleep
2nd hour extra study “B” grade 2 hours of sleep
3rd hour extra study “A” grade 3 hours of sleep
Suppose you can save $50 by buying your car in a different city.
If the trip involves only $10 in gasoline, is the trip worthwhile? Why or why not?
(A) Eating pizza in the Dining Hall
(B) Going to see a movie Tuesday night
(C) Going to see a movie on Saturday
(D) Watching television
Economists use graphs called production possibilities curves to show alternative ways of using a country’s resources.