Chapter 1
Key Economic Concepts
What is Economics?
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Job Market
Housing Market
Consumer Mkt.
Manufacturing
Education
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Taxes
Banking and investing
International trade
Health care industry
R&D
Fundamental Economic Problem:
Scarcity
• Unlimited wants vs. limited resources leads
to scarcity.
• Scarcity causes people to make choices.
– Real world example: Do we have enough
resources (money, doctors, hospitals) to
ensure our entire population with “Cadillac
level” insurance?
– Do I save money for a car or college?
– Do I buy a laptop or a new cell phone?
• Economics is the study of how people
make choices
• Choices lead to trade-off decisions
– Take a trip to Hawaii or work
• With every trade-off, we have opportunity
costs
• The value of what was given up, or the
next best option
– If you take the trip, you miss out on wages
Scarcity Visual
Unlimited wants
Limited resources
Scarcity
What to
produce?
How to
produce?
How many
to produce?
For whom to
produce?
Questions all Societies must
answer:
What to produce?
• New large hospitals or
small neighborhood clinics?
How to produce?
• For profit private companies
or, non-profit, co-op, or govt.
funded?
Questions all Societies must
answer:
• For whom to produce? Great healthcare
only for those who can afford it or average
to above-average for all?
• How many to produce? Many MRIs or
few?
Limited resources
(aka Factors of Production)
• Natural Resources- farmland, rivers and
ports, mines, forests, etc.
• Human Resources- Workforce – both
blue and white collar workers.
• Capital Resources- goods used to produce
other goods & services. Money used for
business.
• Entrepreneurship- Combining other factors of
production in a new way.
Definitions
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Economics
Macroeconomics
Microeconomics
Good
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Service
Consumers
Producers
Productivity
Types of Economies
• How countries answer the 4 econ. ques.
• Traditional – Answers to econ. questions
answered through tradition. Ex. Gwitchin
• Command – Govt. answers econ. ques.
Ex. Communist countries like Cuba & N.
K.
• Market – marketplace answers ques. Ex.
U.S.