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