Economics 101 Unit 4 Notes
What Does “Economics” Mean?
- --Economics is the study of MONEY!
Needs & Wants
- --We all must have a certain amount of food, water, clothing, & shelter to survive—NEEDS!
- --Anything beyond these needs is a WANT
- -- Need : something required for survival; well defined & limited
- -- Want : something desired; endless
- --People have limited incomes ; this forces us to make choices about how to spend our money
- --Economists also count the “choice” we didn’t make as the opportunity cost , or trade-off
- -- Opportunity Cost : the thing that is given up when something else is chosen
What Do We Spend $ On?
- --How people spend their limited resources depends on their needs, likes and dislikes, income, available substitutes, and the price of goods they want
- -- Goods: any manufactured product, like food, shoes, TVs, etc.
What Does This Mean for Businesses?
- --Like people, governments and businesses face limits and must make choices
- --Businesses have limited profits , and countries have limited resources
- --Resources include workers, money from taxes, natural resources, & machinery
- --Because everyone faces limited resources, or scarcity , everyone makes choices
- -- Scarcity : not enough resources, time, or money for all needs and wants
- --Some choices individuals make include:
- --whether to save or spend their money
- --how to spend their money
- --how to divide their time between work and leisure
- --Businesses have to decide what to make, how much of it to make, how to make it, and what to do with their profits
- -- Profits: money earned beyond the cost of making and selling the product
- --Profits can be taken as owner income, divided among workers, or invested in the business
- -- Invested : to commit money with the hope of making more money
- --which natural resources to preserve and which to sell
- --how to spend the nation’s income
- --between spending on things such as the military, education, roads, health services, etc.