Basic vocabulary you need to even begin to think about econ.

1. Intro To Econ
Lecture Presentation #1

2. VOCABULARY
Resources Production Wants
Goods Services Scarcity
Opportunity Benefits Costs
Producers Labor Capital
Consumers Macro-
Economics
Micro-Economics

3. What is Economics?
Economics is the science that deals
with the production, allocation,
distribution and use of goods and
services
Put that into YOUR words

4. Micro and Macro
Economics
 Micro= the “small” picture
 One specific event or business
 Study of individual decision-
making
 Macro= the “big” picture
 The entire economy of
businesses and choices
 Study of nationwide
phenomena

5. The three basic questions of
economics (WHFW)
•What:
•What goods and services should be produced?
•How:
•How should we produce these goods? How do we
decide which method is best in producing our goods
and services
•For Whom:
•Who will consume the goods and services that are
produced? How will these goods and services be
distributed among the different individuals in the
economy

6. Scarcity and Choice
The Facts of Life:
-Resources are, and always will be,
limited
-The amount of goods an economy
can produce is determined by how
many resources are available at a
given time
-Given a set amount of available
resources, an economy must decide
how to cope with these limited
resources.

7. Factors of Production
 RESOURCES: The land, labor, capital, and
entrepreneurship used by society to produce
consumer satisfying goods and services.
 Land
 Labor
 Capital
 Physical
 Human
 Entrepreneurship

8. RESOURCES:
Land provides the basic raw materials--
vegetation, animals, minerals, fossil fuels--
that are inputs into the production of goods
(natural resources).
Labor is the resource that does the "hands
on" work of transforming raw materials
into goods.

9. Resources Continued
•Capital: term for the vast array of
tools, equipment, buildings, and
vehicles used in production.
•Also means $ (to buy this stuff)
•Also includes the investment in the
people involved
•Spend $ to make $
•Entrepreneurship: taking the risk of
bringing the other resources together
and initiating the production process.

10. Goods & Services
 SERVICES: Activities that
provide direct satisfaction
of wants and needs
without the production of
tangible products or goods.
(Doing stuff for others)
GOODS: The physical,
tangible products used to
satisfy people's wants and
needs (stuff you can touch)

11. Scarcity and Opportunity
Costs
In a world of scarcity, choosing one thing
means giving up something else.
The opportunity cost of a decision is the
value of the good or service forgone.
What did action or thing did you give up that you
WOULD have done if you had the resources?
Now YOU give an example of an opportunity
cost

12. Supply
 The willingness and ability to sell a range of
quantities of a good (stuff) at a range of prices,
during a given time period.
 Things that effect supply?
 How much you have
 How hard it is to get
 How much you control
 How fast you can get it

13. Demand
The amount of goods an individual,
entity, or group will be ready, willing,
and able to purchase at a given time at
various prices.

14. Demand: How it is affected
Variables that affect consumer demand:
* The price of the product.
* Consumer income.
* Prices of related goods (substitutes and
complements).
* Consumer tastes and preferences
* Expectations of future prices and availability.
* Numbers and ages of buyers.

15. Needs vs Wants
 NEEDS: Those things which are required
for survival in a given setting
 WANTS: The psychological desire which
makes life just a little more enjoyable,
but which is not physiological necessary
to life.

16. Utility
 Utility = satisfaction
 HOW MUCH the item satisfies a want.
 When making choices, we tend to go for
those things that give us the greatest
UTILITY or satisfaction.
 May also think of it as “usefulness”

17. Production
PRODUCTION: The process of
transforming the natural resources of the
land into consumer satisfying consumption
and capital goods using scarce resources.
i.e. – making natural “stuff” into usable,
sellable “stuff”

18. Benefits and Costs
 BENEFIT: What you gain from doing
something
 BENEFIT-COST RATIO: The benefit of an
activity per dollar of cost. If benefits are greater
than costs, then the project is worthwhile, if
they are less, then it isn't.

19. Unintended Effects
 That which you did not count on when you made your choice
 Example:
Paper tiles were $100 each
I sold an average of 100 per day
I made $10,000 per day
WHAT IF I sold tiles at $200 each
Shouldn’t I make $20,000?

20. Real Life Unintended
Effects
 Govt wants to help small businesses.
 Many small businesses use trucks
 Contractors, Electricians, Landscapers, Delivery Vans etc
 Govt passes law that allows businesses to write off the cost of
their trucks on their taxes
 Unintended Effect: Millions of people buy SUVs so they can
write off the cost on their taxes
 Use more gas
 Less gas = higher price
 Also have more fatal accidents

21. Scarcity, choices, opp.
costs
 People have wants.
 Because scarcity exists, people have to make choices.
 Because people have to make choices, they have
opportunity costs
 The unintended effects of decisions can become part
of the costs