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Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
Idol.Unit5.Pp Tpresentation.Kevinlambert
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Idol.Unit5.Pp Tpresentation.Kevinlambert

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  • 1. The Economizing Problem Wants and Needs Choice and Cost
  • 2. Economics Defined • Economics is the study of how people use their scarce resources to satisfy their unlimited wants. • The study of economics begins with a problem that must be solved. This problem is universally known as the economizing problem: • 1. Society's material wants are virtually unlimited. • 2. Economic resources are limited, or to put it another way, are scarce.
  • 3. Material Wants • So let's discover what exactly material wants are before we tackle this economizing problem. Material wants are the desires of consumers to obtain and use various goods and services which provide utility. But my good professor, you may ask, what does this term utility mean? • Utility it the satisfaction received from consumption, or a basic sense of well being achieved from consumption. And the overall objective of all economic activity is to attempt to satisfy all material wants, in other words; to maximize utility.
  • 4. Factors of Production • So, now that you know a little more about material wants, let’s move on to the next economic term in our discussion of the economizing problem, which is the subject of economic resources. • Resources of Economic Systems are the inputs, or factors of production, used to produce the goods and services that people want. • These resources consist of LABOR, CAPITAL, LAND, AND ENTREPRENEURIAL ABILITY. It may be convenient to group these four factors of production into two broader categories:
  • 5. Human Resources • Human Resources - the productive physical and mental abilities of people. • 1. Labor - the physical and mental effort used to produce goods and services. • 2. Entrepreneurial ability - managerial and organizational skills needed to start a firm, combined with the willingness to take risks.
  • 6. Material Resources • Material Resources - natural resources, raw materials, machinery, transportation, etc.... • 3. Land - plots of ground and other natural resources used to produce goods and services. • 4. Capital - the buildings, equipment, and human skill used to produce goods and services
  • 7. Prices • Now, because resources are scarce, they can command a price in the marketplace: • WAGES - payment to resource owners for their labor. • INTEREST - payment to resource owners for the use of their capital. • RENT - payment to resource owners for the use of their land. • PROFIT - the reward for entrepreneurial ability; the revenue from sales minus the cost of resource used by the entrepreneur.
  • 8. Goods and Services • I would like to take a moment to briefly interject the meaning of two terms that I have been using quite a bit so far, in our discussion of the economizing problem. • Those two terms would be GOOD and SERVICE. A good is a tangible item used to satisfy human wants and a service is an activity used to satisfy human wants. A good is something like a textbook, or an ice cream cone, or even an automobile. A service, on the other hand, is like visiting a doctor's office, getting a haircut, or having someone prepare your taxes.
  • 9. Scarcity • Okay, lets finish our discussion of the economizing problem with the economic term that is most often misunderstood; SCARCITY. Scarcity occurs where the amount people desire exceeds the amount available at a zero price. In other words, it is the condition that arises because the available resources are insufficient to satisfy wants. • Think of scarcity when you make choices throughout your day, week, or even year. Think of the limitations on your energy, money, time, knowledge and good fortune in order to satisfy all your desires.
  • 10. Choice Entails Cost • And, because resources are scarce, the decision to use them for one purpose necessarily precludes their use for another. • In other words, CHOICE ENTAILS COST and that without scarcity, there would be no economizing problem and no need for prices.
  • 11. Things to Think About • Think about this, just by reading your textbook you will entail a cost. That cost would be your next best alternative that you could be doing, whether it is watching TV, playing games, talking on the phone, or being with your friends. • The choices that you make are determined by the utility that you will gain from that action and weighing it against the utility of the next best alternative.

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