This document provides an introduction to economics, covering the four factors of production (land, labor, capital, entrepreneurship), the three basic economic questions (what, how, and for whom to produce goods and services), types of economies (traditional, command, market, mixed), and key economic concepts like productivity, division of labor, supply and demand, and comparative advantage. It defines economics as the study of how individuals and societies make choices to satisfy unlimited wants with limited resources.

1. Goal 7Introduction to Economics

2. What is Economics?Economics: the study of how people seek to satisfy their needs and wants by making choices

3. THE FACTORS OFPRODUCTIONGOAL 7: Economics

4. There are 4 Factors of Production:Land or Natural ResourcesCapitalLaborEntrepreneurship

5. Land or Natural ResourcesMaterials that are NATURALLY MADE and transformed into something elseExamples:OilTimberLandCropsNatural gasMilk

6. 2 Types of Natural ResourcesNON-RENEWABLEOnce used, resource is goneEx: Oil, Natural Gas, Gold RENEWABLECan be replaced or renewed or recycledex: wood, water, crops

7. LABORPEOPLE who work to produce a good or serviceExample:Construction workerTeacherLine cook

8. CAPITALMAN MADE instruments that assist in making something elseExamples:HammerRobotBookComputer

9. Human CapitalInvestment in education or training for a laborer for more productive laborers

10. EntrepreneursPeople who RISK time and money ($) to start their own businessExamples:OprahBen & Jerry’sLittle girl selling LemonadeDonald Trump

11. Needs v. WantsNeed: something people need that is necessary for survival (ex: air, food, shelter) Want: an item we desire but that is not essential to survival

12. Three Basic Economic QuestionsWhat good and services should be produced?Should money go to schools or a new city park??Howshould these goods and services be produced?How much of the product are we going to produce?For whom should these goods and services be produced?After goods and services have been produced, society must determine how goods and services should be distributed among members of society…use a price system in the US

13. Every CHOICE you make has a…Monetary cost: price you paid for a decision ($)Trade off: ALL of the alternative choicesOpportunity cost: the best alternative, your second choice

14. Scenario #1Dondrick studied for his exam instead of watching American Idol or doing his laundry.

15. Scenario #2Iesha has decided to go to college instead of getting a full-time job or joining the Navy.

16. Scenario #3Michael bought a pair of Air Jordans instead of buying his mom a birthday gift or a new jacket for himself.

17. Productivity

18. How does an assembly line increase a company’s profits? Divides up the tasks to make a product and allows a worker to specialize in a task to make it fasterMore product = more profit

19. Division of LaborDividing up the tasks required to make a product.

20. SpecializationGiving a worker a specific task to completeWorker becomes a professional in the task

21. Automationcreating a product with the assistance of machinery

22. Types of WorkersBlue Collar:wage-earning workers who wear work clothes ex: mechanics, miners, maids White Collar:office and professional workers who do not wear a uniform. Ex: lawyer, teacher, doctor

23. Types of WorkersSkilled workers:Workers who get special training to do their job, earn more for their educationEx: mechanic, teacher, doctorUnskilled workers:workers do not have any special training that allows them to earn more than a basic wage Ex: fast food employee, cashier

24. What will happen to a company if they add too many factors of production?Law of diminishing returnsAt a certain point adding another factor of production will make a company less productive (lose $)GraphWhat do you think this would look like?

25. Law of Diminishing ReturnsThe tendency for a continuing effort toward a particular goal to decline in effectiveness after a certain amount of success has been achieved.

26. Supply and Demand

27. How can comparative advantage influence what a company or country produces?Comparative advantage: a country, individual, or company can produce a product at a lower cost than a competitor Produce products for less money to make a greater profit

28. TYPES OF ECONOMIES

29. 3 Basic Economic QuestionsWhat to produce?How to produce?For whom to produce?

30. Traditional EconomyWhat is produced?Traditional items are produced according to customHow is it produced?According to custom, no specialization or division of laborFor whom is it produced?For the local people

31. Command / Planned EconomyWhat is produced?Gov’t decides what they believe to be best for the whole country. How is it produced?Gov’t owns companies, dictate how to make things. Use specialization and division of laborFor whom is it produced?Produce only what is needed for the country

32. Market EconomyWhat is produced?Whatever sellers want to produce. Supply and demand are the main factors in decision making How is it produced?Competition exists. Business is run for profit. Specialization, division of labor used. For whom is it produced?Produce for whoever will buy in your country and throughout the world

33. Mixed EconomyMost countries have mixed economies. They combine aspects of the 3 economies to make what is best for them. Ex: United Statesmostly market (individuals buy and sell)Some command (gov’t rules and restrictions) Little traditional (Native American, Amish communities)