1. The document provides an introduction to basic economic concepts such as scarcity, factors of production, and different economic systems. It defines economics as the study of how people make choices with limited resources. 2. It describes the fundamental economic problem of scarcity and how societies must answer questions about production, distribution, and consumption of goods and services. The three main factors of production are land, labor, and capital. 3. The document introduces the concept of mixed economies and the circular flow model to illustrate how markets for goods/services and factors of production work in a mixed economy like the United States.

1. UNIT #1: Introduction to economics PRACTICAL ECON

2. What is Economics? The social science that studies the choices people make as they try to satisfy their wants in a world of scarcity.

3. The Fundamental Economic Problem SCARCITY = tension between unlimited wants and the limited productive resources available for satisfying these wants Needs are required for survival Wants are desired for satisfaction

4. How to make best use of limited productive resources to satisfy human wants Every Society must answer 3 questions 1. What goods and services will be produced? 2.Howare goods and services to be produced? 3. For whom are goods and services to be produced?

5. Factors of Production (Productive Resources) 1. LAND / Natural Resources – “gifts of nature”, these are NOT created by human effort 2. LABOR / Human Resources – human work effort both mental & physical 3. CAPITAL – man-made goods used to produce other products

6. The Other Guy: Final Factor of Production 4. Entrepreneur – risk takers who combine land, labor, and capital and turn them into new products

7. Role of the Entrepreneur What do they do? Combine factors of production to create product Successful entrepreneurs attract other firms to the industry (this helps everyone!) Search for profits = new products = competition = more production = lower prices for consumers (What’s this called?)

8. Other Basic Economic Language Review Production Equation LAND + LABOR + CAPITAL = PRODUCT

9. Intangible can’t be touched / felt Services tasks that you pay other people to perform for you services are INTANGIBLE Tangible able to be touched Goods anything that satisfies a person’s wants & is TANGIBLE Durable - Used 3 + years and lasts Nondurable - Used 3 + years and does not last What’s the difference between consumer and capital goods???

10. Why would you buy that? Utility - is a good’s or service’s capacity to provide satisfaction or usefulness, which varies with the needs and wants of each person Disutility- is a good’s or service’s capacity to provide dissatisfaction (unhappiness)

11. How are goods & services distributed? We use a rationing device a way to distribute our products Our rationing device is price!!! Besides the price of items, what else influences who gets what?

12. Making Good Choices Without enough resources to satisfy our wants, we have to CHOOSE which wants we will satisfy Example: Maria earns $1000 a month. She wants a new outfit, 10 new books, a trip to Hawaii, a new car, and many other things. Maria can pay the price of all of these things but can’t have them all. She has a decision to make!

13. Economic Decision Making Trade-Off Trade-offs are the alternative choices people face in making an economic decision. Discussion – What are your tradeoffs by going to the next school dance? Opportunity Cost Opportunity cost is the cost of the next best alternative among a person’s choices. The opportunity cost is the money, time, or resources a person gives up, or sacrifices, to make his final choice. The OC Discussion – What is your opportunity cost of going to the school dance?

14. Think! What’s the difference between trade-offs & opportunity costs? (IN YOUR OWN WORDS!) Why do you think economists believe opportunity cost is an important factor to consider in addition to monetary cost?

16. Review: Opportunity Cost Both producers (those who provide goods/services) & consumers (those who use goods/services) incur opportunity costs when making decisions Ex. Business owner of insurance company Ex. Consumer purchasing carpet There’s No Such Thing as a Free Lunch!

17. Economic Systems An economic system is the way a society coordinates the production and consumption of goods & services. Three Types of Economic Systems are: Command Traditional Market

19. Type of Economic System in United States DQ: What type of economy is the U.S.? How do you know? DQ: There were times where the U.S. became more of a command economy such as ???? DQ: Any traditional economies present in the U.S.????

20. Circular Flow Model Model details the flow of money and goods in a market economy The factor market is where individuals sell there resources to businesses to gain income The product market is where individuals use their income to buy the goods & services businesses sell.

24. Economic & Social Goals of an Economic System (Pg. 39-41 NB) Economic Freedom Economic Efficiency Economic Equity Economic Security Economic Stability Economic Growth

25. What are the most important goals of each economic system? Traditional Command Market

26. Characteristics of the American Economy

28. Government should let people (producers & consumers) make economic decisions, including owning resources, without gov’t restraintsDoes the U.S. practice capitalism? If so, how? #1: Limited Role of Government Yes, private individuals own factors of production BUT have to use them within legislated limits.

30. Individuals free to own and control the factors of production & make economic decisions

31. There are some government regulations-

32. Zoning laws, child labor laws, waste disposal, minimum wage, random inspections, etc.#2: Freedom of Enterprise

33. Who makes the decision about what should be produced, buyers or sellers? #3: Freedom of Choice BUYERS!! ***Consumers are free to buy what they want! ***Government may intervene when necessary…example: fixing prices!

34. Profit- $ left after all costs have been paid Profit Incentive-Desire to make create new businesses and products to seek profits DQ: Can businesses fail? How does this relate to entrepreneurship? #4: Profit Incentive

35. Property can be owned by individuals, not just the government. A Few Examples: Houses, land, cars, clothing, or intellectual property. You can own anything you can afford!! DQ: Can the government take away property? #5: Private Property

36. #6 Competition Competition is the rivalry among businesses to win more business Benefits Higher levels of productivity Better quality products More products available LOWER PRICES!!! Do I buy “Payless Converse” or “real Converse”? +Payless less expensive +Real may have better quality

37. What do we want in our economy? FREEDOM GOVERNMENT

38. We know we are a Mixed Economy We have both private individuals owning factors of production with freedom of business, but we also have government regulation/ownership!