Economics – Chapter 1

Economist Alfred Marshall stated that economics is about the
Ordinary business of life
Ordinary business is
How people choose to satisfy their wants.
What is fundmental in economics?
Choice making – Personal, business or government
What is economics?
Social science that studies how people, acting individually and in groups, decide to use scarce resources to satisfy their wants
Why is economics considered a social science?
Because it involves the study of people
Why is economics considered a science?
Because it uses many tools of analysis to explain how the economy works
What do we consider as an ongoing concern of economics?
How people choose to satisfy their wants and why they make the decision they do.
At what scenario would study of economics not exist?
If there were a magic genie that can give you anything you want forever.
What is physical want?
Food, clothing and housing. Anything that occurs over and over.
What changes with physical wants?
As you grow older the what you eat and what you wear changes.
What is psychological want?
The wants that are not necessary to exist but makes people feel better or happier.
Provide an example of psychological want?
Wanting to wear designer clothes or owning a special car.
How do physical and psychological wants get mixed up in our minds?
When we want more and more.
What is the “Want Satisfaction Chain”?
The steps involved in producing what a “human want”
What are the steps in “Want Satisfaction Chain”?
1. Human Want
2. Need
3. Production
4. Distribution
5. Consumption
6. Satisfaction
What is production?
The process that combines economic resources so the result is a good or service.
what is distribution?
the process of getting a product or service to consumers.
What is consumption?
Using a product or service.
What begins the “Want satisfacton chain”
Human wants
What ends the “Want satisfaction chain”?
Consumption
What is the basic element used to produce goods and services?
Resources
What are the 3 types of productive resource?
Natural, human and capital
What are natural resources?
unaltered gifts of nature such as oil, minerals, timber and fresh water.
What are natural resources also known as?
Land
What are human resources?
the physical and mental effort people use to create the goods
What are human resources also known as?
Labor
What are capital resources?
The buildings, tools and machines people use to create goods.
Give an example of capital resource?
the truck that delivers the clothes to the store.
What type of resources would this be – A computer used to deliver information
Capital
What type of resource would this be – A programmer who creates a software.
Labor
What type of resource would this be – The wood used to build houses
Land
What do economist call land, labor and capital?
Factors of production
What do economists call the 4th factor of production?
Entrepreneurship
What is entrepreneurship?
The skills needed to start and operate a business.
What are the type of skills needed for an entrepreneur
Imagination, innovation and management
_____________ is important to the success of a business and the US Economy.
Entrepeneurs
What is gap scarcity?
The gap between what people want and the resources available to produce it.
What is scarcity?
The inequality between want and resource available to satisfy them.
What is the formula for Scarcity?
SCARCITY = WANTS > AVAILABLE RESOURCE
A resource is scarce only when there is not enough to
meet the need for it.
If small amount of resource is available but it is not wanted then……
it is NOT scarce
what is opportunity cost?
the highest valued alternative given up as a result of making a choice.
Example of opportunity cost: If a family decides to go on trip but also need flat screen tv.
The family cannot use the trip money to purchase TV.
Example of opportunity cost: if you work after school and have a test to study
you cannot use the work time to study.
What did John Maynard Keynes said about economics?
Economics is a method, an apparatus of the mind, a technique of thinking.
_________is the initial step in explaining much of human behavior and in understanding of economics.
Choice-making
What forces people of “choice-making”?
scarcity