Understanding Economics


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ECON: introduction to ECON powerpoint 1

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Understanding Economics

  1. 1. Unit: Understanding Economics Essential Questions: 1. What do economists study and how does the economy affect society? 2. How can we distinguish between the four main types of economic systems? 3. What are the characteristics of America's free enterprise system and how does this system change over time?
  2. 2. What is Economics? <ul><li>Economics: the study of how society chooses to use scarce resources to satisfy its unlimited wants and needs </li></ul><ul><li>Generally economists have two categories: microeconomics and macroeconomics </li></ul><ul><li>Microeconomics: the study of the choices made by economic actors such as households, companies, and individual markets </li></ul><ul><li>Macroeconomics: the study of the behavior of entire economies </li></ul>
  3. 3. Economic Decisions <ul><li>There are two large groups of economic decision makers: </li></ul><ul><li> -consumers - people who decide to buy things </li></ul><ul><li>-producers - people who make the things that satisfy consumers’ needs and wants </li></ul><ul><li>--goods: physical objects that can be purchased </li></ul><ul><li>--services: actions or activities that are performed for a fee </li></ul><ul><li>-what examples can you think of? </li></ul>
  4. 5. Economic Resources <ul><li>Resource: anything that people use to make or obtain what they need or want </li></ul><ul><li>Resources that can be used to produce goods and services are called factors of production </li></ul><ul><li>4 categories: </li></ul><ul><ul><li>Natural resources - items provided by nature that can be used to produce goods and to provide services. Ex.farmland, fish filled rivers, oil fields, coal mines (based on scarcity - only factors of production if it is scarce) </li></ul></ul><ul><ul><li>Human resources - physical or intellectual </li></ul></ul><ul><ul><li>Capital resources - manufactured materials used to create products; include capital goods (buildings, structures, machinery, tools used in the production process) and money used to purchase them; consumer goods and technology </li></ul></ul><ul><ul><li>Entrepreneurship - based on entrepreneur who attempts to start a new business or introduce a new product; models of entrepreneurship - bill gates, michael dell, etc… </li></ul></ul>
  5. 6. Scarcity <ul><li>All resources are limited, but wants are unlimited </li></ul><ul><li>Scarcity: combination of limited economic resources and unlimited wants (think about what you know about history and how scarcity has forced societies to war, colonialism, imperialism, CREDIT DEBT) </li></ul><ul><li>Nylon during WW2 - more parachutes, less women’s stockings? CHAOS!!!! </li></ul>
  6. 7. Productivity <ul><li>Because of scarcities, societies have to figure out how to allocate (distribute) resources properly </li></ul><ul><li>Basic questions: what to produce, how to produce, for whom to produce </li></ul><ul><li>What is level of productivity? (level of output that results from a given level of input) does it meet needs? Is it efficient? Efficiency is the use of the smallest amount of resources to produce the greatest amount of output </li></ul><ul><li>Some economists believe that to heighten efficiency you must introduce a division of labor for people to focus on one activity or specialization </li></ul><ul><li>Understanding and maximizing productivity is the essential aspect of the economy </li></ul>
  7. 8. How do consumers cope? <ul><li>What if you have one resource, but two demands? The sacrifice of one for another is known as a trade-off . </li></ul><ul><li>The value of the best alternative that is given up to obtain the preferred item is the opportunity cost . What trade-offs do you have? How do you decide what is best? </li></ul>
  8. 9. How do companies plan their companies output? <ul><li>If Nike only produced high priced sneakers would they survive? Well, okay, maybe, but companies and entrepreneurs must consider a wide range of production possibilities. </li></ul><ul><li>This can be charted in a production possibilities curve </li></ul>
  9. 10. <ul><li>A shift to the right indicates improvement in technology or new resources </li></ul><ul><li>Shifts also occur to the left, which are not as positive, why? </li></ul>
  10. 11. Forms of Exchange <ul><li>Barter: direct trade </li></ul><ul><ul><li>Relies on barter </li></ul></ul><ul><ul><li>Can result in complicated transactions </li></ul></ul>
  11. 12. <ul><li>Money: any item readily accepted by people in return for goods or services </li></ul><ul><ul><li>Dollars, pesos, lire, shekels, euros, yen, metals, salt, beads, cocoa beans </li></ul></ul><ul><ul><li>Three functions: item traded for goods or services, producers and consumers can determine worth, can be saved and used later </li></ul></ul>
  12. 13. <ul><li>Credit: allows consumers to use items before completing payment for the merchandise </li></ul><ul><ul><li>Interest included: an extra payment for the borrowing </li></ul></ul><ul><ul><li>Goods can be taken back </li></ul></ul>
  13. 14. Determining Value <ul><li>Why do some things, such as diamonds, hold more “value” than things needed, such as water? </li></ul><ul><li>Value is often determined by scarcity </li></ul><ul><li>Value is often determined by the usefulness of the item to a person </li></ul><ul><li>Can you think of other examples? </li></ul>
  14. 15. Interdependence <ul><li>Self-sufficiency: people or societies can fulfill all of their needs without outside assistance </li></ul><ul><li>Is there any truly self-sufficient societies? Think of how people and societies maneuver to deal with their lack of self-sufficiency </li></ul><ul><li>Relying on others for goods and/or services is known as interdependence </li></ul><ul><ul><li>What are the benefits/challenges? </li></ul></ul>