Unit One
Thinking Like an Economist
Fundamental Economic Concepts
Chapter One
What is Economics?
The Study of how people try to satisfy
what appears to be seemingly unlimited
and competing wants through the careful
use of relatively scarce resources.
Do you think the study of
economics is worth your time and
effort?
1. Go to page 3, examine the picture –
How does this image symbolize the
chapter titled What is Economics?
2. Imagine you have $100 to spend – make
a list of items that you would like to buy
and the approximate price of each. Add
up the total – did you go over a $100? If
so you will need to remove something
from your list
Choice is the Key concept in Economics!
Scarcity and the Science of
Economics
Lesson 1
Go to page 6 and Complete the Scarcity activity.
What is the most fundamental
economic problem facing all
societies?
SCARCITY
The condition that results from society not
having enough resources to produce all the
things people would like to have.
Do you know the difference
between a need and a want?
Need – is a basic requirement for
survival – food, clothing, shelter
Want – is a way of expressing a need –
example – for food a person may
“want” pizza
Economic Products – goods and
services that are useful, relatively
scarce, and transferable to others.
Good – an item that is economically useful or
satisfies an economic want
-Durable and Nondurable goods
Project information
Make a Collage
• Divide your paper in half
• Label one side “Durable Goods” and the other
side “Nondurable Goods.”
• Collect 6 pictures to use as example for each side
• Graded on :
• Following Directions: 5 points
• Durable Goods: 15 points
• Nondurable Goods: 15 points
• Neatness/Name/Title: 5 points
• Turned it on Time: 10 points
• Total: 50 points
Adam Smith
pg. 9
1. Adam Smith is considered the
_______________.
2. What is the name of his book and in what year
was it written?
3. Smith believed that political economics
depends on a __________________.
4. What did Smith mean by “Invisible Hand”?
5. What type of capitalist system did Smith
support?
Important Economic Terms
Consumer Good – use by individuals
Capital Goods – used to produce other goods
Services – work that is performed
Consumers – one who uses goods and services
Value – refers to a worth that can be expressed in
dollars and cents
Paradox of Value - what makes something
valuable?
Utility – the capacity to be useful and provide
satisfaction
Wealth – accumulation of products
What is TINSTAAFL?
THERE IS NO SUCH THING AS A FREE LUNCH
Three Basic Questions
• What to produce?
• How to Produce?
• For Whom to Produce?
The Scope of Economics
• Description - Gross Domestic Product
(GDP)
• Analysis
• Explanation
• Prediction
Copy and answer the following questions:
1. What is the basic economic problem facing all
societies?
2. How is need different from want?
3. What do the letters TINSTAAFL stand for, and what
does the term mean to consumers?
4. What are the three basic questions societies have to
answer about the way their resources are used?
5. What are the four key elements of the study of
economics? Explain briefly why each one is
important.
6. What is scarcity in an economic sense?
7. What is the difference between a consumer good and
a capital good?
8.What kind of economic product is a
service?
9.What is a consumer?
10.To what does value refer?
11. What is the paradox of value?
12.What is required for something to have
value?
13.What is wealth?, List the four
characteristics of the accumulated goods that
make up economic wealth.
14. Define GDP
Our Economic Choices
Sec. 2
Think of the economy as two broad
groups:
Producers and Consumers
Complete activity on page 14
Factors of Production
• Land – natural resources
• Capital – tools, equipment, machinery
and factories used in production
(Capital Goods) (Financial Capital)
• Labor - workers
• Entrepreneurs – risk takers
Equals – Production – the process of
producing goods and services
Production Possibilities Curve
• Identifying Possible Alternatives
• Fully Employed Resources
• Opportunity Cost – the value of the next best
alternative given up
• The Cost of Idle Resources
• Economic Growth
There are alternatives and costs to everything we do. In
a world where “TINSTAAFL”, it pays to examine these
concepts closely.
TRADE –OFFS or alternative choice – figure 1.5 - discuss
OPPORTUNITY COST – the cost of the next best
alternative use of the money, time, or resources when one
choice is made rather than another
Consumer Rights
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•
•
•
•
The right to safety
The right to be informed
The right to choose
The right to be heard
The right to redress
Consumerism - a social movement that aimed at
promoting the interests of consumers
Complete sec. 2 handout
Using Economic Models
sec. 3
Because resources are scarce,
consumers need to make wise
choices.
Economic Growth
• When a nation’s total output of goods and
services increase over time
Economics growth requires risks and sacrifices.
Economic Growth – occurs when a nation’s total output of
goods and services increases over time
The most important factor to Economic Growth is Productivity
Productivity – measure of the amount of output produced by a
given amount of inputs in a specific period of time
Division of Labor – workers are arranged so that individual workers
do fewer task
Specialization – when a worker does one task and does it well
Human Capital – the sum of the skills, abilities, health, and
motivation of people
The Circular Flow of Economic
Activity
• Factor Market – the market where
productive resources are bought and sold
• Product Markets – market where producers
sell their goods and services to consumers
Draw the chart on page 25 and answer the questions under the
chart - turn in for a grade
Economic Interdependence
We rely on others, and others rely on
us to provide the goods and services
that we consume
Thinking Like an Economist
• Build Simple Models
• Employ Cost-Benefit Analysis –compare
the cost of an action to the benefits received
• Take Small, Incremental Steps
The Road Ahead
• Understanding the FREE ENTERPRISE
ECONOMY- one in which consumers and
privately owned business, rather than the
government, make the majority of the WHAT,
HOW, & FOR WHOM decisions
• STANDARD OF LIVING – the quality of life
based on the possession of necessities and
luxuries that make life easier
• Economics for Citizenship
• Making the Rational Choice
Chapter 1, sec. 3, pg. 29
Answer questions 2 – 6
Chapter 1, Assessment– 33
Answer # 1 - 15
Turn in for a grade
Chapter 1 test on 8/18