What is Economics? <ul><li>The study of how people, firms, and societies choose to allocate scarce resources with alternative uses. </li></ul>
What is Scarcity? <ul><li>The condition that exists because human wants exceed the capacity of available resources to satisfy those wants. </li></ul>
Macroeconomics <ul><li>The study of the functioning of the economy as a whole, and it deals mainly with the total level of output and income of the economy, the total level of employment, and movement in the average level of all prices. </li></ul>
Microeconomics <ul><li>Study of the behavior of individual households, firms, and markets, of how prices and outputs are determined in those markets, and of how the price mechanism allocates resources and distributes income. </li></ul>
Wants v Needs <ul><li>Needs include food, clothing, and shelter </li></ul><ul><li>Wants are everything else; desires that can be satisfied by consuming a good or service. </li></ul><ul><li>Some economists believe that health care and basic education are also needs. </li></ul>
What are resources? <ul><li>What is used to produce goods and services; the basic resources include land or natural resources, capital, labor or human resources, and entrepreneurship. </li></ul>
Land or Natural Resources <ul><li>"Gifts of Nature" that can be used to produce goods and services; for example water, mineral deposits, forests, and actual fields. Also referred to as natural resources. </li></ul>
Labor <ul><li>The quantity and quality (skills, knowledge, and physical health) of human efforts available to produce goods and services. </li></ul>
Capital <ul><li>Goods made and used to produce other goods and services, ie buildings, tools, and equipment. </li></ul>
Entrepreneurship <ul><li>Some economists classify entrepreneurship as the fourth factor of production. </li></ul><ul><li>Ability of individuals to start new businesses, to introduce new products and techniques, and to improve management techniques </li></ul>
Intermediate Goods <ul><li>Goods used in the production of other goods </li></ul><ul><li>For example, sheet steel used in the manufacture of car bodies or construction; cheese in a pizzeria </li></ul><ul><li>Intermediate goods are different from capital goods in that they cannot be used again. They are changed in the production process. </li></ul>
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