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What is Economics?
In what ways do people cope with the problem
of scarcity?
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Definition
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A social science dealing with how people satisfy seemingly
unlimited and competing needs and wants with the careful
use of scare resources.
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The Basic Economic Problem
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Scarcity – fundamental economic problem of meeting people’s
virtually unlimited needs and wants with limited resources.
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Why are resources scarce?
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Why are wants and needs unlimited?
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Needs and Wants
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Needs & wants are usually expressed in terms of economic
products.
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Goods – Tangible economic products.
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Services – Work that is performed for someone else.
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Both have value.
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Why do things have value?
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The Paradox of Value
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This idea confused philosophers until Adam Smith came
along.
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Wrote The Wealth of Nations which explained many economic
concepts.
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Scarcity & utility cause something to have value.
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Utility is not measureable, and varies from person to person.
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Wealth

A nation’s wealth accounts for everything that can be
exchanged.
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Goods are counted as wealth, but services are not because
they are intangible.
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TINSTAAFL
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“There Is No Such Thing As A Free Lunch”
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Everything we do has a cost.
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Questions All Societies Face
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WHAT to Produce?
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HOW to Produce?
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FOR WHOM to Produce?
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WHAT to Produce?
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Cannot produce everything people want.
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In different countries this question is answered by different
groups of people.
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How do American consumers determine what will be
produced?
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HOW to Produce?
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Should a producer use more machinery or more people?
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Answer dictated by the situation the producer finds itself in.
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FOR WHOM to Produce?
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There are not enough of a good for everyone, so the
producer must decide who will receive the product.
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Scope - Description
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Economics describes economic activity.
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GDP
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Jobs
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Prices
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Trade
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Taxes
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Government Spending
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Scope - Analysis

Economics analyzes the economic activity it describes.
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Why are some prices higher than others?
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Why do some people get paid more than others?
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Scope - Explanation
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Economists must communicate the information they gather.
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Based on careful research and attribute ideas to source
material.
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Scope - Prediction
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Economics helps make predictions about the future.
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Studies what is happening, what tends to happen, and the
possible outcomes of many actions.