INTRODUCTION TO ECONOMICS!!!!, Lecture notes of Economics

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INTRODUCTION TOINTRODUCTION TO

ECONOMICS ECONOMICS

Choices, Choices, Choices,... Choices, Choices, Choices,...

Part 1: ThePart 1: The Basics Basics

The Study of EconomicsThe Study of Economics Macroeconomics Macroeconomics

• (^) The big picture: growth,The big picture: growth, employment, etc. employment, etc.
• (^) Choices made by largeChoices made by large groups (like countries) groups (like countries) Microeconomics Microeconomics
• (^) How do individuals makeHow do individuals make economic decisions economic decisions

ECONOMICS: 5 EconomicECONOMICS: 5 Economic Questions Questions Society (we) must figure out Society (we) must figure out WHAT to produce (make) WHAT to produce (make) HOW MUCH to produce HOW MUCH to produce (quantity) (quantity) HOW to Produce it HOW to Produce it (manufacture) (manufacture) FOR WHOM to Produce FOR WHOM to Produce (who gets what) (who gets what) WHO gets to make these WHO gets to make these decisions? decisions?

BUT, there’s aBUT, there’s a Fundamental Problem: Fundamental Problem: SCARCITY: unlimited wants and SCARCITY: unlimited wants and needs but limited resources needs but limited resources

Choices, ChoicesChoices, Choices Because ALL resources, Because ALL resources, goods, and services are goods, and services are limited – WE MUST MAKE limited – WE MUST MAKE CHOICES!!!! CHOICES!!!!

Wants and Needs,Wants and Needs, Needs and Wants Needs and Wants

NEEDS – “stuff” we must have to survive, NEEDS – “stuff” we must have to survive,

generally: food, shelter, clothing generally: food, shelter, clothing

WANTS – “stuff” we would really like to WANTS – “stuff” we would really like to

have (Fancy food, shelter, clothing, big have (Fancy food, shelter, clothing, big

screen TVs, jewelry, conveniences... screen TVs, jewelry, conveniences...

Also known as LUXURIES Also known as LUXURIES

VS.

Trade-Offs, cont.Trade-Offs, cont. IN YOUR JOURNAL: What COULD you have IN YOUR JOURNAL: What COULD you have done instead of come to school today? done instead of come to school today? These are all Trade-Offs! Thanks for being These are all Trade-Offs! Thanks for being here! here!

A special kind of Trade-Off is anA special kind of Trade-Off is an OPPORTUNITY COST = OPPORTUNITY COST = The Value of the Next Best Choice The Value of the Next Best Choice (Ex: Sleeping is the opportunity cost of studying for a test) (Ex: Sleeping is the opportunity cost of studying for a test)

ProductionProduction So how do we get all So how do we get all this “stuff” that we this “stuff” that we have to decide about? have to decide about? Decisions, decisions Decisions, decisions … …

PRODUCTION, cont.PRODUCTION, cont. Production is how Production is how much stuff an much stuff an individual, business, individual, business, country, even the country, even the WORLD makes. WORLD makes. But what is “STUFF”? But what is “STUFF”? STUFF – Goods and STUFF – Goods and Services. Services. Goods – tangible (you Goods – tangible (you can touch it) products can touch it) products we can buy we can buy Services – work that Services – work that is performed for is performed for others others

4 Factors of Production4 Factors of Production LAND – Natural Resources LAND – Natural Resources

• (^) Water, natural gas, oil, trees (all the stuff we find on,Water, natural gas, oil, trees (all the stuff we find on, in, and under the land) in, and under the land) LABOR – Physical and Intellectual LABOR – Physical and Intellectual
• (^) Labor is manpowerLabor is manpower CAPITAL - Tools, Machinery, Factories CAPITAL - Tools, Machinery, Factories
• (^) The things we use to make thingsThe things we use to make things
• (^) Human capital is brainpower, ideas, innovationHuman capital is brainpower, ideas, innovation ENTREPRENEURSHIP – Investment $$$ ENTREPRENEURSHIP – Investment $$$
• (^) Investing time, natural resources, labor and capitalInvesting time, natural resources, labor and capital are all risks associated with production are all risks associated with production

Which Factor of Production?Which Factor of Production?