What is Economics?

Economics

Study of how people seek to satisfy their needs and wants by making choices.

Dissecting the DefinitionNeeds: something like air,

food, shelter that is necessary for survival

Wants: an item that we desire but that is not essential to survival

Additional Info/Vocabulary TermsAllocate

to divide among or distribute in shares

Activity

In your groups, answer as many questions correctly as you can. Each correct answer gets bonus points for your team!

Now, decide how you would allocate your bonus points between your group members How many different ways could you allocate your

resources? Which method did you choose and is it fair? Is every member of your group satisfied?

Additional Info/Vocabulary TermsResources

the means to accomplish something

Econ’s No.1 Problem… Scarcity:

When there is not as much of a good or service as everyone wants. Do you have as much money as

you could possibly want? When the new iPad/iPhone hits

the market, is it immediately available for everyone?

How do you deal with scarcity? Everyday you are making tons of economic

decisions; more commonly referred to as choices. What are some choices you have made today?

This week? This year? What information do you weigh when making

a decision or choice? Want vs. Need, cost, efficiency, items you are

missing out on, etc.

Dissecting choices

Trade-Off: giving up some of one thing to obtain more of the next best alternative

Opportunity Cost: what was given up in a trade-off, the next best alternative

Which would you choose? You have 1000$ in graduation money…..1) Buy new clothes2) Buy “stuff” for your car3) Take a vacation before college

What was your second choice?1) Buy new clothes2) Buy “stuff” for your car3) Take a vacation before college

MicroeconomicsStudy of economic behavior

& decision making of small units, such as individuals, families, & businesses

Individual decision making is micro (small)

MacroeconomicsStudy of economic behavior & decision making of entire economies

Examines major trends for the economy as a whole

Societal decision making is macro (large)

Three Basic Questions??? In economics there are 3 basic

questions that every country must answer…What to produce?How to produce?For whom should we produce?

Economic SystemsA set of rules by which a

nation answers the basic questions of what, how, and for whom.

Types of Economic SystemsTraditionalCommandMarketMixed

Traditional Decisions are based mostly on

customs

Difficult to change Mostly in underdeveloped

countries/3rd world countries Example: Chad

TraditionalAdvantages versus

Disadvantages Advantages Low

unemployment rate Little or no money

is used

Disadvantages Not much

economic growth Little scientific

development No choices Low standard of

living

Command Government ownership & control

of production Government makes ALL

decisions 2 main types Socialism &

Communism Example: North Korea

CommandAdvantages versus

Disadvantages Advantages Focuses on

Equality Capable of rapid

change Economies are

very stable

Disadvantages Very little individual

freedom No reason for hard

work

Market Means of production are owned &

controlled by private individuals or groups

Government plays a small role Market determines how resources

are used Cannot be found today

MarketAdvantages versus

Disadvantages Advantages Can adjust easily to

change Competition No government

interference Unlimited

opportunities to make money

Disadvantages Society does not

always get basic needs

Higher risk for failure

Monopolies are present

Mixed Government plays limited but some role in

decision making Focuses on Free Enterprise System Usually 70% individual control & 30%

government control Sometimes other way around but very rare

Example: United States

Additional Info/Vocabulary TermsDivision of Labor

Separate the process of production into specific tasks

Additional Info/Vocabulary TermsSpecialization

Concentrate labor on single tasks