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What is Economics?
Transcript of What is Economics?
MAKE DECISIONS TO SATISFY THEIR UNLIMITED NEEDS AND WANTS WITH LIMITED RESOURCES NEED:
necessary for survival WANT:
desired but not
required What do we
need and/or want? GOODS: physical objects SERVICES: actions or activities that
one person performs for
another Where do goods and services come from? LAND LABOR CAPITAL Land: natural resources Labor: human effort Capital: the stuff we use to make stuff Entrepreneurship:
creativity applied to
the factors of production TYPES OF CAPITAL PHYSICAL HUMAN THE FACTORS OF PRODUCTION ARE SCARCE! SCARCITY VS. SHORTAGE SCARCITY: permanent condition there is never
enough of anything humans can
never be satisfied Shortage:
will be fixed soon How Do Economist Think? Joseph Stiglitz,
Nobel Prize in Economics, 2009 THEY THINK... ABOUT COSTS IN THE MARGINS Costs: (not price) If Economics is about choices,
then choosing is refusing! COSTS:
What you give up
in order to get or do
something TRADE OFFS:
everything you give up
in order to do or get something OPPORTUNITY COSTS:
the TRADE OFF you really, really wanted the most There is no such thing
as a free lunch! Somebody pays! Governments have to make choices A Classic Economics Model A = underutilization
X = impossible
B,D,C = POSSIBLE with costs Resources are scarce You must make choices Choosing to produce butter costs guns Choosing to produce guns costs butter HOW DO WE MAKE