The document discusses fundamental economic concepts. It defines economics as the study of meeting unlimited wants with scarce resources. It explains that economies allocate scarce resources to meet unlimited demands and that different economies do this in various ways, such as the US and Cuba. The purpose of economics is to describe, analyze, explain, and predict economic activity. Scarcity is identified as the biggest economic problem, as resources are scarce but wants are unlimited. Factors of production and the three basic economic questions are also outlined.

1. Fundamental EconomicFundamental Economic
ConceptsConcepts

2. EconomicsEconomics
 The study of meeting peoples unlimitedThe study of meeting peoples unlimited
wants and needs with scarce resources.wants and needs with scarce resources.

3. EconomyEconomy
 How a society chooses to allocate itsHow a society chooses to allocate its
scarce resources to the unlimited wants ofscarce resources to the unlimited wants of
its people (there are many kinds ofits people (there are many kinds of
economies).economies).
 How do we do this in the U.S.?How do we do this in the U.S.?
 How is it done in Cuba?How is it done in Cuba?

4. Purpose of EconomicsPurpose of Economics
Goal is to describe,Goal is to describe,
analyze, explain,analyze, explain,
andand predictpredict
economic activity.economic activity.

5. Biggest Economic Problem:Biggest Economic Problem:
ScarcityScarcity
 ALL RESOURCES ARE SCARCEALL RESOURCES ARE SCARCE
 WE HAVE UNLIMITED WANTSWE HAVE UNLIMITED WANTS
 There Is No Such Thing As A Free LunchThere Is No Such Thing As A Free Lunch

6. Factors of Production – The thingsFactors of Production – The things
used to make other thingsused to make other things
1.1. LandLand
(natural resources)(natural resources)
2.2. LaborLabor
(human resources)(human resources)
3.3. CapitalCapital
(non natural resources)(non natural resources)
4. Entrepreneurs4. Entrepreneurs
Pencil FactoryPencil Factory

7. Because of scarcity producersBecause of scarcity producers
must make choicesmust make choices
3 Basic Economic Questions3 Basic Economic Questions
1.1. What to produce?What to produce?
2.2. How to produce?How to produce?
3.3. For whom to produce?For whom to produce?

8. Because of Scarcity ConsumersBecause of Scarcity Consumers
Must Make ChoicesMust Make Choices
 Trade Off: Alternative choiceTrade Off: Alternative choice
 Opportunity Cost: The cost of the nextOpportunity Cost: The cost of the next
best alternative that was given up.best alternative that was given up.

11. Core Economic PrinciplesCore Economic Principles
1.1. Because of Scarcity People Must ChooseBecause of Scarcity People Must Choose
2.2. All Choices Involve CostsAll Choices Involve Costs
3.3. The Consequences/Rewards of Choices Lie inThe Consequences/Rewards of Choices Lie in
the Futurethe Future
4.4. People Respond to Incentives in PredictablePeople Respond to Incentives in Predictable
WaysWays

12. Econ VocabEcon Vocab
 ProductivityProductivity
 Measure of the amount of output produced with a setMeasure of the amount of output produced with a set
amount of F.O.P. (Factors of Production)amount of F.O.P. (Factors of Production)
 SpecializationSpecialization
 Focusing on a specific task in order to be moreFocusing on a specific task in order to be more
efficient.efficient.
 Economic InterdependenceEconomic Interdependence
 Because of specialization, each economy depends onBecause of specialization, each economy depends on
other economies.other economies.

13. More Econ VocabMore Econ Vocab
 ValueValue
 Something has value if it can be expressed in termsSomething has value if it can be expressed in terms
of dollars and cents.of dollars and cents.
 WealthWealth
 Something has wealth if it can be passed on toSomething has wealth if it can be passed on to
someone else. (It must be desired)someone else. (It must be desired)
 UtilityUtility
 The usefulness of something. (Does it have a high orThe usefulness of something. (Does it have a high or
low utility?)low utility?)

14. LandLand LaborLabor CapitalCapital EntrepreneurEntrepreneur OpportunityOpportunity
CostCost
ScarcityScarcity ValueValue UtilityUtility WealthWealth ProductivityProductivity
SpecializationSpecialization EconomicEconomic
Interdepen-Interdepen-
dencedence
TINSTAAFLTINSTAAFL ConsumerConsumer ProducerProducer
FactorFactor
MarketMarket
ProductProduct
MarketMarket
ParadoxParadox
of Valueof Value
Trade OffTrade Off GoodsGoods
ServiceService ProductionProduction
PossibilitiesPossibilities
FrontierFrontier
CircularCircular
Flow ofFlow of
Econ.Econ.
ActivityActivity
3 Basic3 Basic
EconEcon
QuestionsQuestions
EconomicsEconomics