1. Explain the fundamental economic problem.

2. Examine the 3 basic economic questions that every society must answer.

3. List & give examples of the 4 factors of production.

• scarcity economics

• need want

• land capital

• financial capital

• labor

• entrepreneur

Economics: Study of how people try to satisfy unlimited wants with limited resources

**#1 Rule of Economics: TINSTAAFL (means?)

Most people want more than they already have

(Don’t you?!)

Basic Economic Problem:

SCARCITY – condition resulting from society not having enough resources to produce all the things

people would like to have Needs vs. Wants

3 BASIC QUESTIONS EVERY SOCIETY MUST ANSWER:

1. What to produce

2. How to produce

3. For whom are the products are being produced

4 FACTORS OF PRODUCTION

1. Land

Must benatural & is limited

2. Capital

Tools, equipment,machinery,

factories used forproduction

3. Labor

4. Entrepreneurs

Risk takers insearch of a

new business

1. Explain the relationship between goods, services, scarcity, value, utility & wealth.

2. Understand the circular flow of economic activity.

• economic product good

• consumer good capital good

• service value

• paradox of value utility

• wealth market

• factor market product market

• economic growth productivity

• human capital

Economic Products - goods & services that are useful, relatively scarce & transferable4 Types of Goods (give 4 examples of each):

1. Consumer - used by?2. Capital – used to?3. Durable – lasts for?4. Nondurable – lasts for?Service – work performed by someone

Econ. products must have 2 things:

1.Value – worth expressed in dollars & centsParadox of value – some necessities have little value whereas some non-necessities have higher value

Ex. “diamond-water paradox”

Why? Scarcity!

Economic products must have (cont’d)

2. Utility – capacity to be useful & provide satisfaction (not measurable, different for everyone)

Wealth – sum of tangible goods that are scarce, useful & transferable from one to another (services not included)

Circular Flow of Economic Activity

Markets – locations/mechanisms that allow buyers & sellers to trade (can be local, regional, national, global)Factor Market – where productive resources are bought & sold (where you make your $)

Product Market – where goods & services are sold (where you spend your $)

Economic growth occurs when a nation’s total output of goods and services increases over time

Productivity – measure of the amount of output produced by a given amount of inputs in a specific time period

Investing in human capital (sum of the skills, abilities, health & motivation of people) contributes to increasing productivity

1.1.Analyze trade-offs & opportunity costs.

2.2. Explain the reasons for studying economics.

• trade-off

• opportunity cost

• production possibilities frontier

• cost-benefit analysis

Matt has 2 choices for a summer job. The 1st opportunity is at a computer manufacturer, where he would earn $10.25 an hour. The 2nd is with a landscaping company, where he could work & have lunch with 3 of his closest friends every day. That job would pay $8.65 an hour. For one 40-hour workweek, what would be the opportunity cost, in dollars, of accepting the landscaping job? What would be the opportunity cost of accepting the manufacturing job?

Cost-Benefit AnalysisCost-Benefit Analysis: The benefit should outweigh the cost

Economics for CitizenshipEconomics for Citizenship:Studying economics will not tell you what decisions to make, but it will help you become a better decision-maker