What is Economics?
Chapter 1
Section 1, Ch 1
Economics-study of the choices that
people make to satisfy their needs
and wants.
2 Categories:
1. Microeconomics: study of the
choices made by economic actors
such as households, companies, and
individual markets.
2. Macroeconomics: examines
the behavior of entire economies.
Who makes decisions?
1. Consumers-people who decide
to buy things.
2. Producers-people who make
the things that satisfy our needs &
wants.
You make choices based on your
needs & wants, that reflect your
desires for goods and services.
1. goods-physical objects that can
be purchased.
2. services-actions/activities that
are performed for a fee.
3. needs-basic things food,
shelter, clothing, etc.
4. wants-everything other than
needs (car)
Economic Resources:
Resources-anything that people can
use to make or obtain what they need
or want.
Resources that can be used to
produce goods and services are
called factors of production.
-natural resources
-human resources
-capital resources
-entrepreneurship
Section 2, Ch 2
Three basic economic questions:
1. What to produce?
2. How to produce?
3. For whom to produce?
Section 3, Ch1
Trade-off: exchanging one thing for
the use of another
opportunity cost: the next best
alternative that had to be given up for
the alternative that was chosen.
productions possibilities: are all the
combinations of goods and services
that can be produced from a fixed
amount of resources in a given
period.
Chapter 2 Economic Systems
Types of Economic Systems:
A. Traditional: things are done the
way they have always been done;
based on customs and beliefs.
B. Command (Controlled):
individual has little influence on how
economic questions are answered.
Gov’t controls. Central Planners
decide who will receive the product
what will be produced and how.
C. Market (Capitalism)
Individuals answer basic
questions. Gov’t doesn’t intervene.
Market between buyers and sellers.
Private individuals own the factors of
production.
D. Mixed Economies:
combines elements of traditional,
market, and command.
Authoritarian Socialism-closest to
pure command model. Also known
as communism. Gov’t owns or
controls nearly all the factors of
production.
Capitalism-closest to the market
model. Individuals owns the factors
of production and answer the
economic questions.
Democratic Socialism-between
authoritarian socialism an capitalism.
Gov’t owns some of the factors of
production.
Ch 2 , Section 2
5 features of the free-enterprise
system of the U.S.
1. Own private property and
enter into contracts.
2. Make individual choices.
3. Engage in economic
competition.
4. Make decisions based on
self-interest
5. Participate in the economy
with limited government
involvement and regulation.
Ch 2, Section 3
U.S. Economic Goals:
-freedom
-efficiency
-equity
-security
-stability
-growth