Economizing Problem
Economizing Problem-the need to make choices because
economic wants exceed economic needs
Individuals' Economizing Problems (Micro)
Limited Income
-We all have a finite amount of income
-Even Donald Trump must decide how to spend his money
Average Income Chart
Unlimited Wants
-most people have unlimited wants
-we desire a variety goods and services that provide utility
-Necessities-food, shelter, water, clothing
-Luxuries-yachts, fancy cars, swimming pools
-over a short period of time our wants are satisfied but in
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the long run we will always want more
With limited income and unlimited wants we are forced to
economize: we pick and choose goods and services that
maximize our satisfaction
Budget Line -displays limited income in a two goods
economy
Attainable vs. Unattainable
Opportunity Cost
Society's Economizing Problem (Macro)
-Society also has to make choices on how to spend their
money
-should society spend money on safety (police, courts,
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-should society spend money on safety (police, courts,
prisons) or education (teachers, books, and schools)
Scarce Resources
-includes all natural, human, and manufactured resources
that goes into goods and services
Economics 4 main resource categories
1. Land-includes all natural resources ("gifts of nature")
Forest, minerals (gold, silver, coal), oil, water
2. Labor-consists of physical and mental talents of individuals
Teacher, NFL player, Rocket Scientist, Technician
3. Capital- includes all manufactured aids in producing a good
or service.
Factory, storage, transportation, tools, machinery,
computers
4. Entrepreneurial Ability
-takes initiative in combing land, labor, and capital to build
a successful business
-makes strategic business decisions
-innovator (comes up with new ideas)
-Risk Taker
Factors of Production- Land, Labor, Capital, and
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Entrepreneurial ability
Homework:
You are given a $50 itunes gift card. You can only buy
Songs for $2 or movies for $10 with your gift card.
1. Create a budget line graph that shows how many movies
and songs you can buy.
2. Show which side of the line is attainable
3. What is the opportunity cost to buying a movie?
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