. - -. . ·--..

;
:_~. ·· .lN:-fRODUCTION TO
) ". '· '. _-ECO~OMICS
- 4~ • -~ •• :.., .... •,t• · : • . • Part 1: The
· _:,_:1-~ - ~h_olces_,:Cholces, Choices, ...
Basics

WHAT :-I S ECONOMICS??? The Study of Economics

• Econo_rnics - the study of how individuals i:I Macroeconomics
and societies make decisions about ways - The bag picture : growt h.
to use scarce resources to fulfill wants and employment. e t c.
needs. - - _·•,_·- . • , - Choices m ade by la rge
groups (hl<e coun tries)
• What doe;, THAT mean?!!??!!
.:i Microeconomics

-
.
- Ho\v do individuals mako

. .
economlc decisions
 ECON OMICS : 5 Econom ic What are resour ces?
Questi ons
Society (we) must figure out ..J Definitio n: The things used to make other
• WHAT t o produce (make) goods
• HOW MUCH to produca
(quantity)
• HOW to Produce it
(manufac ture)
!I FOR WHOM to Produce
(who gats what)
• WHO gets to make these
decisions ?

BUT, there's a
.I ..

Funda menta l Proble m: Choic es, Choic es

,._
I has a monev.
SCARC ITY: unlimit ed w ants and ~ · W~ldDIIIIIU ;>
needs but limited resou rces
C. I, _,,_- :l B ecause ALL resource s.
goods. and services a re
. l imited - WE MUST MAKE
.. CHOICES !!!!

.
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 Why Choices? Wants and Needs,
' . Needs and Wants

if
We make choices about how we spend our
money, time, and energy so we can fulfill
.:1 NEEDS- "stuff' we must have to survive,
generally: food, shelter, clothing

our NEEDS and WANTS.

What are NEEDS and WANTS? :iii WANTS - "stuff'' we would really like to
have (Fancv food. shelter. clothina. bia

TRADE-OFFS
vs. You can't have it all (SCARCITY -
remember?) so you have to
choose how to spend your
money, time' and energy. These
decisions involve picking one
 A special kind or Trade-OH is an

Tra de- Offs , cont. OPP ORT UNI TY COS T =

• IN YOU R JOUR NAL: What COUL D you have
done inste ad of come to schoo l today ?
-,_..'-'I ~
Th e Valu e of the Next Bes t Cho ice
(Ex: Sleeping 1s lhe opportunity cos! o' studying for
a test)

Opp ortu nity Cos ts Pro duc tion

do .J So how do we get all
31 This is really IMPO RTAN T - when you choos e to
worth ) is this ··stuff ' that we
O NE thing, its value (how much ii is
meas ured by the value of the NEXT BEST CHOI CE. have to decid e abou t?
- This can be in time, energ y, or even MONE Y Decisions. decis ions

Then I
If I buy a can'I dHord
pizza .•. tnc -,--- --
 PRODUCTION, cont.
J Producti on is how
much stuff an
individual, business,
country, even the
WORLD makes.
• But what is MSTUFF"?
Factors of Production
th is Sluff?
• STUFF - Goods and u So, what do we need to make all of
Services.
■ Goods - tangible (you
can touch II) products
we can buy

4 Factors of Production Which Factor of Production?

■ LAND - Natural Resources
- Water, natural gas, oil, trees (all the stuff we find on,
in, and under the land)
■ LABOR - Physical and Intellectual
- Labor ts manpowe r
.I CAPITAL - Tools, Machinery, Factories
-The thin m h,n
Which Factor of Production?

THREE parts to the Production

Which Factor of production? Process
:J Factors of Production - what we need to make
goods and services

~ Pr~ducer - c~mpany that makes goods and/or

delivers services

!I Consumer - people who buy goods and services

(formerly known as "stuff')
 Capital Goods and Consumer
Production Process Goods
.ii Capital Goods: are
used to make other
goods

!E Pr~uction/Manufaclllling
-... • , ·Factory'. · ·
~
•• ..1:,. . I Consumer Goods:
r---.- __. .ic . .. /
.3
fin~I nrnrl11r.ts th~t ~rP.

CHANGES IN PRODUCTION CHAN GES IN PRODUCTION

J S ecializci_tion - . ~

div1d 1ng up production J 1visi n of Labo - - ~- -- 1:1 --:

·, ~-
so that Goods are
\JIOductd efficiently
different people '..... . . '~ ·-.... ·•.~

perform different jobs ..- .... \L.

-...
:. -·'·;~~do ;
to achieve greater . . . and
JOb. I
1 domy Job
efficiency (assembly . j ·.H, will b11 r
line). :=- EFFICIEI
 CHA NGE S IN PRODUCTION CHA NGE S IN PRO DUC TION
.l """"''-'-="-' --U.....,"'-' - how
much we buy ..J 1r we INCRE ASE land, labor, capital we
(Consumer INCRE ASE produc tion
Sovereignty) " - Many enlrepre ncurs ,nvest profit back ,nto product ion
The DELL store Is : _ : . ,1 • ~ i~
empty becaus e.... ~ ~ 1_(t t ~-'. \ ~ .J If we DECRE ASE land , labor, capital we
DECRE ASE produc tion
~ -; :l.:i!:in·1 -it :,
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-:.:._
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~ ~ H Qrunna IC ot Iha "l RI IT W HY wn11lrl WP. P VP.r nFr.R FA~F

The Circu lar Flow Model PRO DUC TION , cont . aga in
21 A measure of the production of an entire
country in one year is

The total peso value of ALL final Good s and

Services