Economics: The study of how individuals,
businesses and nations make choices based on
scarcity.
Scarcity: Unlimited wants combined with limited
economic resources.
 SO, People have to make choices.
 You must choose how to spend your time
 Businesses must choose how many people
to hire


Need: essential for survival (ex: food)
Want: everything that is NOT a need (ex:
luxury car)
1.
Trade-offs – EVERY alternative you give up
as the result of making a decision.
Example: You have $10 and decide to spend it on
going to see a movie. The “trade-offs” are
anything else you could have bought for $10.
2. Opportunity Cost – Only the BEST
alternative to a decision you make.

Example: You have $10 and decide to spend it
on a movie. Your second choice would have
been to go out to dinner. (The dinner is the
opportunity cost to the decision to go to the
movie).
Assume:
1. You want to visit a friend through the end of
next week.
2. You earn $100 every weekday.
3. You have three flights to choose from:
4. Tonight is Thursday Night.
Thursday Night Flight = $275
Friday Early Morning Flight = $300
Friday Night Flight = $325
Which flight should you choose? Why?
"Every gun that is made, every warship launched,
every rocket fired signifies, in the final sense,
a theft from those who hunger. The cost of
one modern heavy bomber is this: a modern
brick school in more than 30 cities. It is two
fine, fully equipped hospitals. It is some fifty
miles of concrete pavement.”
--Dwight Eisenhower speaking against
military spending during the Cold War

Launched in 1975, total cost $679 million (in
2015 dollars, it would cost $2.8 billion.



All resources that are used to produce a good
or a service.
1. Land (Farmland, water, coal, forests)
2. Labor (Doctor, McDonald’s worker)

3. Capital: Any man-made resource that is
used to produce other goods and services.
2 Kinds:
 A. Physical (factory, tools)
 B. Human (education)…you are all increasing your
own human capital right now!

4. Entrepreneurs: People that combine land,
labor, and capital to create goods and
services.
MICROeconomics Study of small economic units such as individuals,
firms, and industries (ex: supply and demand in
specific markets, production costs, labor markets,
etc.)
MACROeconomics Study of the large economy as a whole or economic
aggregates (ex: economic growth, government
spending, inflation, unemployment, international
trade etc.)
Positive Statements
Based on facts. Avoids value
judgments (what is).
Normative Statements
Includes value judgments (what I
believe ought to be).


Consumer Goods – Products
and services that directly
satisfy human wants
(Cheeseburger, Eye Exam).
Capital Goods – Goods that
indirectly satisfy human
wants in the future (factory,
screwdriver).