18-1 What is Economics? Review

Need

An item we have to have that's required for survival.

Want

An item we would like to have.

Economics

1. The study of how people make decisions with limited resources. 2. The study of how things are made, bought, sold, and used.

Society

A group of individuals living together in a community.

Economic System

A way of producing the things it's people want and need.

How to Produce

After deciding how to produce, a society has to decide how to produce goods and services and as a society, will we allow to produce these goods? and we have to keep in mind how it will effect the environment, the preservation of remaining resources, the workers, the community, etc.

Buyers

Consumers

Micro and Macro

Economics is divided into these two branches or types

Microeconomics

Focuses on the decision making of individuals and businesses. (small picture)

What to Produce Example

If I had three trees I could cut down, I can either build a house, or two boats for my family fishing business and I can only do one or the other, so I have to make a choice.

How to Produce Example

If we need more crude oil to satisfy our energy needs, should we allow drilling in an Alaskan wildlife sanctuary? Or should we restrict oil recovery to less fragile areas? How much pollution should we allow manufacturing firms to create?

Macroeconomics

Looks at the economy as a whole and looks at the decision making of governments, whole industries and societies. (big picture)

Choices/Decisions

Needs and wants

For Whom to Produce

Once goods and services are produced, the society has to decide who is going to receive them and ways this is decided are through price system, majority rule, lottery, first come: first serve, shared equally among everyone and military force.

Scarcity

People do not have enough resources to produce all of the things they would like to have and it causes us to choose among alternatives. (unlimited wants and limited resources)

Suppliers

Producers

Tools

Supplies or resources used

Free Enterprise Capitalism

The U.S. economic system and for many other countries in which businesses can compete for profit with minimal government interference.

Scarcity Effects

The economic success of a country; includes decisions of what to produce, how much to produce, how goods and services will be produced, and who will get what is produced and the economic decisions a country and its people make.

The Problem with Scarcity

The more resources it has, the more economic decisions its people can make and fewer resources it has, the fewer economic decisions its people can make. (includes needs)

Human Resources

The people who provide the necessary labor, skills and knowledge to produce the country's goods and services.

What to Produce

With limited resources, choices have to be made and if one product is created or purchased, another cannot due to limited resources.

Economic Model

The theory that tries to explain human economic behavior. (example of microeconomics and macroeconomics)

Resources

Things used in making goods and services

Examples of Resources

Tools, natural resources and human resources

Natural Resources

Wood, soil, water

Price System

U.S. uses this for most goods and services

How the Economic System Works

We have to make choices because we have limited resources and a country's system helps determine how basic economic decisions will be made.

Three Economic Choices

What to produce, how to produce and for whom to produce. (which all societies face)

For Whom to Produce Example

Who receives the new cars? Who benefits from a new school? Will anyone who is able and willing to pay for the goods be able to obtain them, or will government decide who will have the goods?