Economics 101

Why Societies Have Economics

• Trade = the exchange of goods and services• Economics = the study of the production,

consumption and distribution of resources• Trade and Economics satisfy people’s needs

and wants

Engaging in Economics

• Producers = people who use resources to make goods and services

• Consumers = people who buy and/or use goods and services to satisfy wants

• Incentive = something that influences the behavior of people

Factors of Production

• Labor = includes time and energy (ex: using my time and energy to deliver SMART Boards)

• Land = made up of the many natural resources that are needed to help produce goods and services (ex: plastic, metal, fiber glass)

• Capital = anything produced in an economy that is used to produce other goods and services (ex: box cutters, Box Truck, boots)

Opportunity Cost

• Opportunity Cost = the highest valued benefit given up when a choice is made (ex: sitting in traffic vs. unemployment)

Scarcity

• Scarcity = the problem that resources are always limited compared with the number and variety of wants people have

Supply and Demand

• Demand = the amount of a product or service that buyers are willing and able to consume at different prices.

• Supply = the amount of a product that producers are willing and able to offer at different prices.