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Fundamental Concepts of Economics

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Travis Pearre

on 11 January 2016

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Transcript of Fundamental Concepts of Economics

What is Economics?
ECONOMICS
Study of human behavior in producing, distributing, and consuming material in a world of scarce resources
Microeconomics
MACROECONOMICS
http://www.reffonomics.com/TRB/chapter1/whatiseconomics1.swf
Why does scarcity force us to make decisions?
We determine which gives us the greatest benefit
We cannot have
T
I
N
S
T
A
A
F
L
CHOICES EQUAL COSTS
Economic Costs
DO NOT ALWAYS
DEAL WITH


SCARCITY AND COSTS
FORCE US TO ASK ?'S
For whom should we produce?
Society must choose based on its population and other available markets.
What are economic "resources" ?
Shelter
Steaks & Potatoes
Necessities
desires
Basic purchases include
Goods
Wants
An item that is economically useful or satisfies an economic want
Needs
ECONOMICS
FUN
damentals
http://www.npr.org/2011/10/31/141816460/visualizing-how-a-population-grows-to-7-billion
It doesn’t matter if you are rich or poor, you have to deal with scarcity
Scarcity
the study of specific units. (Ex. Businesses or specific products)
study of large units
ex. Governments or countries
large parts of the economy
EVERYTHING WE DO
HAS AN
ECONOMIC COST...
IS the fundamental problem of economics
is the condition where unlimited human wants face limited resources. (We can’t do everything we want to do with what time, money, and energy we have.)
Economics is the study of how people satisfy wants with scarce resources
the study of how we deal with scarcity.
HERE
For those who are visual learners:
S
Resources
O
UCH
HING
S
REE
UNCH
THE GOLDEN RULE
OF ECONOMICS
(AND LIFE)
everything we want
NEEDS
WANTS
THESE QUESTIONS ARE ASKED BY INDIVIDUALS,
BUSINESSES, AND ENTIRE NATIONS
What will we produce?
Society must choose based on its need.
How should we produce it?
Society must choose based on its resources.
ESSENTIAL ECONOMIC QUESTIONS.
are required for survival
are desired for satisfaction.

House with large yard
Name Brand Clothes
Food
Clothing
Service
work that is performed for someone
Ex. Doctor visit, legal advice, housecleaning, haircut
Goods
An item that is economically useful or satifies an economic want
Ex. A hamburger, a pencil, or a car
TYPES OF GOODS

Capital goods

are used to create other goods
Bulldozer, Hammer and Nails, etc.
Consumer goods
are intended for final use by individuals
Food, Clothing, Video Games, etc.
They are tangible and can be classified as consumer/capital and durable/ nondurable
Value
is worth expressed in dollars and cents.

Value, Utility, and Wealth

In Economics, there is sometimes a
PARADOX OF VALUE
Wealth
is the accumulation of goods that are tangible, scarce,
useful, and transferable to another person. IT'S NOT JUST ABOUT $$$.
Utility
is a good’s or service’s capacity to provide satisfaction, or
simply put, its usefulness.
For something to have value, it must also have utility.
Durable goods
are intended to last more than 3 years
Cars, Washing Machines, Silverware, etc.
Non-Durable
goods are intended for quick or final use and last less than 3 years...
BONUS WORD

PLANNED OBSOLESCENCE.
WHAT IS IT AND HOW DOES IT APPLY TO TODAYS
GOODS MORE THAN, LETS SAY, THE GOODS YOUR
GRANDPARENTS PURCHASED???
There are NO FREE
ECONOMIC RESOURCES
EVERYTHING HAS A COST
Full transcript