Economics - Chapter One

Needs vs. Wants

• A need is something that is absolutely necessary for survival • Examples = air, food, shelter, clothing, education?, transportation?, employment? • A want is an item that we desire but is not essential to survival • Examples = a new car, the latest IPhone, a vacation to Europe • Wants are endless, but because we cannot have everything we want we must make choices

Shortage

• A situation in which a good or service is unavailable. • A situation in which the quantity demanded is greater than the quantity supplied • Example = during the holiday season many store shelves may be empty; wars and drought can also create shortages that last for years • Shortages are temporary

Goods vs. Services

• Goods are physical objects such as clothes or shoes; tangible items of value, things that we can see or touch • Examples = scissors, textbooks, medicines, speakers, desks • Services are actions or activities that one person performs for another; intangible things that have value • Examples = haircuts, dental checkups, tutoring, teaching

Scarcity

• Limited quantities of resources to meet unlimited wants. • Examples = oil, money, time, rest, food • No one can have an endless supply of everything. Sooner or later, a limit is always reached • At its core, economics is about solving the problem of scarcity • Scarcity is permanent. It always exists because out needs and wants are always greater than our resource scarce

Economics

• The study of how people and societies use limited resources to satisfy their unlimited wants; the study of how people seek to satisfy their needs and wants by making choices • Choices are analyzed at three levels 1. Individual 2. Groups [i.e. family and business] 3. Government • Why must people make choices? --> SCARCITY!!!