Economics – Mr. Schubmehl

Scarcity the fundamental economic problem

Scarcity - Not having enough resources to produce all the things ppl would like to have

Allocation of limited resources (applies to business and personal lives)

What’s the difference?

What do you think? What are wants and what are needs?

A need is a basic requirement for survival

Food, clothing, shelter

A want can be a way of expressing a need

Or a want can be something completely unnecessary for survival

Need Want

To want less

Too many things

Three basic economic questions

1. What to produce?

2. How to produce?

3. For whom to produce?

Consumer goods

Examples – food, clothing, computers, cell phones, tvs, ipods, etc

Capital goods – manufactured good used to produce other goods and/or services

Durable goods – any good that is meant to last three or more years

Services

Examples?

Value, Utility, and Wealth

Value – worth expressed in monetary form

Paradox of Value

Contradiction between necessities and value

Utility

Utility – capacity to be useful and provide satisfaction

Not measurable

Varies from person to person

Does not have to have utility for everyone

Wealth

Tangible Useful Transferable

Circular Flow of the Economy

Factor Markets

The markets where people sell their resources to the businesses

(You participate in factor markets whenever you go to work and sell your labor to an employer)

Product Markets

The markets where producers sell their goods and services to consumers

(You participate in product markets whenever you buy goods and/or services)

Productivity

Measure of the amt of output produced by a given amt of input in a specific time

Goes up when more output can be produced with same amount of inputs in same amt of time

Division and specialization of production

“A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration’s estimate, the cost per American household would be an extra $1,761 a year.”

Opportunity Cost and Trade-offs

Trade-off – alternative choices when you make an economic decision

The choice to buy concert tickets or jeans

Opportunity cost – the cost of the alternative use of money, time, resources, etcwhen one choice is made over the other

Applies to businesses and individuals

Economic and Social Goals

• Economic Freedom

• Economic Efficiency

• Economic Equity

• Economic Security

• Full Employment

• Price Stability

• Economic Growth

Economic and Social Goals

• Economic Freedom – freedom to make your own business decisions. Cornerstone of American society (for now anyways)– Choose your own occupation– Choose where you live, work, etc– Choose who you work for

Economic and Social Goals

• Economic Efficiency – resources are scarce and factors of production need to be used wisely. If factors of production are wasted, fewer goods and services can be produced

. . . . . . . . and business may end up kaput!

Economic and Social Goals

• Economic Equity – sense of justice, impartiality, and fairness. It is illegal to discriminate on the basis of age, sex, race, religion, or disability in employment.

Always been like that?

Balancing act

Economic and Social Goals

• Economic Security – protection from adverse economic events such as layoffs and illnesses. Includes Social Security, Medicare, Worker’s Compensation, Unemployment Insurance.

Economic and Social Goals

• Full Employment

• Price Stability

• Economic Growth