This document outlines some basic economic concepts. It discusses how every society has four factors of production - land, labor, capital, and entrepreneurs - which are used along with resources to produce goods and services. However, resources are limited while human wants are unlimited, creating an economic problem of scarcity. This scarcity means societies must make choices about what goods and services to produce, how to produce them, and who will consume them, establishing an economic system. These choices involve trade-offs and opportunity costs.

1. BASIC ECONOMIC CONCEPTS

2. Every society has FACTORS OF
PRODUCTION.
LAND LABOR CAPTIAL ENTREPRENEURS
which are used to produce
GOODS and SERVICES
But RESOURCES - limited
HUMAN WANTS - unlimited
SCARCITY
Trade-offs&
Opportunity Cost
WHAT goods and HOW will the goods WHO will consume
services will be and services be the goods and
produced? produced? services?
Which creates an
ECONOMIC SYSTEM.

3.  Trade-Offs – Alternative Choices

4.  Should I go to the movies with my friends or
should I do my Economics homework?
 If I do my Eco homework, what is my benefit
and loss?
 If I go see the Bourne Ultimatum, what is my
benefit and loss?

5.  Businesses make trade-offs regarding
land, labor, and capital everyday.
 A farmer who plants broccoli can not use the
same space to plant cauliflower .
 A factory that uses all of its machines to
make chairs can’t make tables.

6.  Economists often call this “guns or butter”.
 A country that uses most of it’s resources for
military goods can’t use them for consumer
goods!
 During WWII, the US needed copper for
munitions, so pennies were made from
steel, not copper. (A trade-off)

7.  Because so many U.S. troops are in Iraq, they
aren’t available to be sent to Korea, where
there is a threat of nuclear weapons use or
production from communist North Korea.
 Instead of considering an invasion the US has
been negotiating with North Korea.

8.  All economic knowledge can be boiled down
to a single phrase:
There is no such thing as a free lunch.

9.  opportunity cost: what you must give up in order
to get something.
 Opportunity cost is crucial to understanding
individual choice:
 Ex.: The cost of attending economics class is
what you must give up to be in the classroom
during the lecture.
 Sleep? Watching TV? Work?
 All costs are ultimately opportunity costs.
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10. I WOULD RATHER BE SURFING THE INTERNET.
 In fact, everybody thinks about opportunity
cost.
 The bumper stickers that say:
 “I would rather be
….{fishing, golfing, swimming, etc…}” are
referring to the “opportunity cost.”
 It is all about what you have to forgo to obtain
your choice.
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11.  Production Possibility Curve - Represents
combinations of goods and services an
economy can produce when all productive
resources are fully used