Unit 8, Lesson 1
Fundamental Economics
Agenda:
1. Fundamentals of econ notes
2. Resources & Scarcity video
Outcome: students will be able to describe
examples of choice in a market
economy.
Economic Choices
We use economics
everyday
► Economics: study of how
we make decisions about
how to distribute limited
resources
► Needs vs. Wants;
difference
► The fundamental economic
problem is the issue of
scarcity
► Scarcity: when we do not
have enough resources to
produce all of the things
we would like to have
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What, How, For Whom
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Unlimited wants + limited
resources = scarcity; what
does society do
Each society has to choose
WHAT to produce; choices?
Each society must choose
HOW to produce; examples?
After goods are produced
each society must decide
FOR WHOM are these
goods for; in the US we use
a price system
These are hard questions
that every country must
answer
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HOW should we get
energy?
Using Economic Models
Economists often
formulate theories about
how economies work from
the data they collect
► These theories become
economic models
► Economic models:
simplified representations
of the real world that used
to help predict what will
happen in the economy
► Models are based on
assumptions; are these
models facts?
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Market Economy
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The United States has a market
economy, often described as
capitalism
Market economy: system in
which supply, demand, and
prices help people make
decisions and allocate resources
Market Economy
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Capitalism: private citizens own
most, if not all, means of
production
Businesses are allowed to
compete for profit with a
minimum of government
interference
Most economic decisions are
made by individuals looking out
for their own and their families’
self interest
The choices you make and
businesses make affect what you
buy and what businesses
produce
Understanding Your Role
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Keeping informed is important
to understanding economics;
ways to get informed?
Smart citizens should
understand how incentives
affect people’s economic
decisions
Incentives: rewards that are
offered to get people to take
certain actions
The role of government should
be to maintain competitive
markets, not to help one group
over another
Government can support their
goals by offering incentives or
punishing; carrot or stick
approach
Economics USA: Resources &
Scarcity
Listen very carefully, and answer the questions on
your video sheet.
There will be three examples presented to you
throughout the video (WWII, 1979, 1980s)
Pay attention to what the economist says and the
explanation of the Production Possibilities Curve.
http://www.learner.org/series/econusa/unit14/