Arnaud Prevot, MBA
PART 1 – ECONOMICS AND SOCIETY
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Collectivism
Society is
responsible for
your position in
life
Liberal
Democrat
Socialist
• Individualism
• You are responsible
for your position in
life
• Conservative
• Republican
• Capitalist
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Left Wing –
Collectivism,
people
working
together
Right Wing –
Individualism
, every
person for
themselves
Authoritarian
– Strong
Government
Libertarian –
Smaller
Government
All property should be private.
2. The government should not interfere in the
economy.
3. The economy (market), if allowed to operate
on its own, will correct problems without the
need for government intervention.
4. Supply and Demand allow for the free
market to fix problems on its own.
1.
But Often Doesn’t
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Founded by Karl Marx in
1848
“The Communist Manifesto”
A response to capitalism
and inequality
Soviet Union, Cuba, North
Korea, China, Yugoslavia,
others…
All property should be public.
2. The government (state) should control the
economy to ensure equality
3. The economy (market), if allowed to operate
on its own, will lead to inequality
4. The state is responsible for its people
1.
PART 2 – WHAT IS THE STUDY OF
ECONOMICS
Economics
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Study of how society manages its scarce
resources
How the choices determine the use of
society’s resources
Basic condition that exists when limited
productive resources exceed unlimited wants
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Limited nature of society’s resources
Inability of society to produce all the goods
and services people wish to have
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More on this later…
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Productive
◦ Raw materials from nature used to produce goods
◦ Land, oil, trees, minerals, other natural materials
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Labor
◦ People paid to produce goods and services
◦ Police, farmer, teacher, inspector, manager, cashier
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Capital
◦ Things used to produce goods and services
◦ Buildings, materials, delivery trucks, cash register
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Entrepreneurship
◦ Used by entrepreneurs to produce goods & services
◦ Main goal is to satisfy society’s wants and needs
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Specialization
◦ Limiting the scope of productive efforts instead of
trying to produce everything needed
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Exchange
◦ Trading surplus quantities of specialized products
for other goods and services
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Next best alternative given up when
individuals, businesses and governments
confront scarcity by making choices
The cost of giving up Item A and choosing
Item B
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The ability of a good or service to satisfy a
wants and needs of consumers
Relative worth of goods and services in an
exchange
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Command
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Market
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Mixed
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Central authority makes key economic
decisions
Government owns and controls resources and
businesses
No competition exists
Prices are controlled by government
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Decisions are made in the marketplace
Resources are privately owned
Business owners set their own prices
Also called a private enterprise
Individuals must make wise choices
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Contains private and public enterprises
Government has more control, but not all
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What to produce?
How to produce?
For whom to produce?
How well does each economic system answer
these questions?
What type of economic system does the US
have?
PART 3 – WHAT IS SCARCITY?
A
good definition of economics
◦ Study of choice under conditions of
scarcity
 Scarcity
◦ Situation in which the amount of
something available is insufficient to
satisfy the desire for it
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There are an unlimited variety of scarcities,
however they are all based on two basic limitations
◦ Scarce time
◦ Scarce spending power
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Limitations force each of us to make choices
Economists study choices we make as individuals,
and consequences of those choices
Economists also study more subtle and indirect
effects of individual choice on our society
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The problem for society is a scarcity of resources
◦ Scarcity of Labor
 Time human beings spend producing goods and services
◦ Scarcity of Capital
 Something produced that is long-lasting, and used to make
other things that we value
 Human capital
 Capital stock
◦ Scarcity of land
 Physical space on which production occurs, and the natural
resources that come with it
◦ Scarcity of entrepreneurship
 Ability and willingness to combine the other resources into a
productive enterprise
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As a society our resources—land, labor, and
capital—are insufficient to produce all the goods
and services we might desire
◦ In other words, society faces a scarcity of resources
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The scarcity of resources—and the choices
it forces us to make—is the source of all of
the problems studied in economics
◦ Households allocate limited income among goods
and services
◦ Business firms choices of what to produce and
how much are limited by costs of production
◦ Government agencies work with limited budgets
and must carefully choose which goals to pursue
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Economists study these decisions to
◦ Explain how our economic system works
◦ Forecast the future of our economy
◦ Suggest ways to make that future even better
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PART 4 – WHY SHOULD I BE INTERESTED IN
ECONOMICS?
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Job Market
◦ Supply & demand for workers
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Gross vs. Net Pay
Lifetime Earnings
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Dropout - $18,900/year
High School - $25,000/year ($1.2 Million)
Bachelor’s - $45,000/year ($2.1 Million)
Master’s – $2.5 Million
Professional - $99,000/year ($4.4 Million)
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Typical 7-Day Walt
Disney World vacation
(4 ppl):
◦ Airfare + Hotel (Disney)
= $1050/person
◦ Park Hopper Pass +
Water Park Option =
$1286 (Total)
◦ Food = $150/day
◦ Total = $6300
◦ Employee or government
provided?
◦ i.e. Cost of having a baby (Avg.
in So Cal):
 Natural delivery w/ hospital stay
(3 Days): $30,000
 Prenatal appointments: $5,000
 Pediatrician visit (1st Year): $1,000
 TOTAL = $36,000
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4 Bedrooms
2.5 Bathrooms
2 Floors
2575 Square Ft.
$229,000 (in
Tennessee)
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2 Bedrooms
1 Bathroom
900 Square Ft.
$400,000 (in
California)
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Cost of Attending a U.C:
◦ Tuition: $8,374
◦ Room and Board: $13,848 (Double room w/ 2
meals per day)
◦ Books: $1,240
◦ Personal: $1,266 (Clothes, entertainment, etc.)
◦ Transportation: $566 (No car – visiting home during
breaks)
◦ Total: $25,308
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The economy
affects interest
rates
Interest rates affect
your overall
monthly car
payment
Can determine what
you can afford
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Desperation
Government Revenue
(“Tax on Stupidity”)
Did you know?
◦ A lottery ticket is only
worth 1/3 of its purchase
price.
◦ After federal taxes, you
only win 1/3 of the total
prize money.
◦ Odds of winning: If you
buy one ticket per week,
you would have to play
for 269,000 years
(quarter-of-a-million
years) to win the jackpot
once.
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Pure supply & demand
UFC Fight - $5000 for
a $250 ticket
(tickets.com)
Laker season tickets
(courtside) - $39,000
(stubhub.com)
Oscar de la Hoya vs.
Floyd Mayweather $49,000 for $500
(eBay)
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Lack of government
funding
Administrative
choices
Fish tank vs. books
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Jobs
◦ 1.5 million
employees
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Sales Tax
◦ How often do you go?
◦ 138 million
customers per week
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Choices
Decision making
Efficient use of resources
Making the world a better place
Improving the quality of life
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Unlimited Wants vs. Limited Resources
◦ Greed and human nature
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Decision Making
◦ Budgeting, choices, benefit vs. cost
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Opportunity Cost
◦ The trade-offs
 To
understand the world better
◦ You’ll begin to understand the cause
of many of the things that affect your
life
 To
gain self-confidence
◦ You’ll lose that feeling that
mysterious, inexplicable forces are
shaping your life for you
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To achieve social change
◦ You’ll gain tools to understand origins of social
problems and design more effective solutions
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To help prepare for other careers
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To become an economist
◦ You’ll discover that a wide range of careers deal
with economic issues on many levels
◦ You’ll begin to develop a body of knowledge that
could lead you to become an economist in the
future
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PART 5 – DIFFERENT TYPES OF
ECONOMICS?
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Micro
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Microeconomics
◦ Micro comes from Greek word mikros, meaning
“small”
◦ Study of behavior of individual households, firms,
and governments
 Choices they make
 Interaction in specific markets
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Focuses on individual parts of an economy,
rather than the whole
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Macro
◦ Macro comes from Greek word, makros, meaning
“large”
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Macroeconomics
◦ Study of the economy as a whole
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Focuses on big picture and ignores fine
details
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