What Is Economics


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What Is Economics

  1. 1. What is Economics? Section 1: How Economic Systems work Mr. Gibbs Spring 2009
  2. 2. Economic Choices <ul><li>Economics is the study of: </li></ul><ul><ul><li>how we make decisions in a world which resources are limited. </li></ul></ul><ul><ul><li>How things are made, bought, sold, used </li></ul></ul><ul><li>Well informed American Citizens MUST CHOOSE HOW TO SPEND THEIR MONEY WISELY </li></ul><ul><li>Well informed American Citizens DO NOT SPEND MORE THAN THEY HAVE…. </li></ul>
  3. 3. Needs vs. Wants <ul><li>Needs – required for survival (food, clothing, shelter) </li></ul><ul><li>Wants – things we would “like to have” </li></ul><ul><ul><li>(entertainment, vacations, etc.) </li></ul></ul><ul><ul><li>There is not enough resources in this world to provide everyone with all of their wants and needs (some people don’t even get their needs!) </li></ul></ul>
  4. 4. Need or Want?
  5. 5. Need or Want?
  6. 6. Need or Want?
  7. 7. Need or Want?
  8. 8. Economics: a Defintion <ul><li>Economics is the study of: </li></ul><ul><ul><li>how we make decisions in a world which resources are limited. </li></ul></ul><ul><ul><li>How things are made, bought, sold, used </li></ul></ul><ul><li>Economics is divided into 2 Branches: Micro and Macro </li></ul>
  9. 9. Microeconomics <ul><li>Small picture </li></ul><ul><li>Behavior and decision making of small units such as individuals and businesses </li></ul><ul><li>Helps explain how some of the individual decisions are made within a small budget </li></ul>
  10. 10. MACROeconomics <ul><li>Big picture </li></ul><ul><li>Looks at the economy as a whole and how the decisions of LARGE units (gov’t, industries, societies) </li></ul>
  11. 11. Micro and Macro <ul><li>These are “economic models” </li></ul><ul><li>And economic model is a theory that tries to explain human economic behavior </li></ul>
  12. 12. Economic System <ul><li>Economic System – way of producing the things people want and need. </li></ul>
  13. 13. FREE ENTERPISE CAPITALISM <ul><li>Businesses are allowed to compete for profit with a minimum of government interference. </li></ul>
  14. 14. Socialism <ul><li>Government ownership and administration of the means of production and distribution of goods, and a society characterized by equality for all individuals, with equal compensation. </li></ul>
  15. 15. The Problem of Scarcity <ul><li>The limits on, or scarcity of, resources force people to make careful economic decisions. </li></ul><ul><li>Resources – the things used in making goods and producing services. Resources can range from tools to wood to human resources </li></ul>
  16. 16. Human Resources <ul><li>A.k.a. – Human Capital </li></ul><ul><li>The people who provide the necessary labor, skills, and knowledge to produce the Country’s goods and services. </li></ul>
  17. 17. Scarcity and the Need to Choose <ul><li>Scarcity occurs when we do not have enough resources to produce all the things we would like to have. </li></ul><ul><li>No Country has all the resources it needs….the result is scarcity. </li></ul><ul><li>Because of Scarcity – we have to make choices among alternatives…. </li></ul>
  18. 18. People Have Limited Resources as well…. <ul><li>20.00 Allowance </li></ul>
  19. 19. What to Produce?!?!?!?! <ul><li>Look at the wants and needs of the community (Micro) or Country (Macro)… </li></ul><ul><li>Should be build….a stadium? Or re-pave the roads? Or a new school? </li></ul><ul><li>Should we spend money on….Weapons for our nation’s defense? or Services for the Handicapped? </li></ul>
  20. 20. HOW TO PRODUCE <ul><li>Even more choices to make…. </li></ul><ul><li>Businesses need to produce as cheaply as possible…. </li></ul>Guy #1: We need oil. Guy # 2: Cool. Guy # 1: How do we get it. Guy # 2: Drill in Alaska. Guy # 1: Can’t. It is environmentally protected. Guy #2: Okay. Let’s buy it from the Saudis. Guy # 1: Can’t. Too much dependence on foreign oil. Funding terrorists. Guy #2: Okay. Lets drill off shore in the Gulf of Mexico. Guy # 1: Grey Area. Waiting to hear from Obama. Guy # 2: What about Alaska? We could Drill there. Guy # 1: …
  21. 21. For WHOM to Produce?!?!?! <ul><li>How will they be distributed among the people? </li></ul><ul><li>Who gets the new cars? Where do we build the new school? </li></ul><ul><li>The Price System…. </li></ul><ul><ul><li>Based on a “fixed price” or a “free price” </li></ul></ul>