1

What Is Economics?What Is Economics?SECTION 1: An Economic Way of Thinking

SECTION 2: Scarcity and Choice

SECTION 3: Opportunity Costs

SECTION 4: Exchange

CHAPTER 1

2

Objectives:Objectives:What is economics?What are the factors of production?What is the goal of entrepreneurship?

An Economic Way of ThinkingAn Economic Way of Thinking

SECTION 1

3

EconomicsEconomicsEconomics is the study of the choices that

people make to satisfy their wants and needs.

An Economic Way of ThinkingAn Economic Way of Thinking

SECTION 1

4

Factors of Production:Factors of Production:natural resourceshuman resourcescapital resourcesentrepreneurship

An Economic Way of ThinkingAn Economic Way of Thinking

SECTION 1

5

The goal of entrepreneurshipThe goal of entrepreneurshipThe goal of entrepreneurship is to create a

good or service of value by developing a new combination of the other factors of production.

An Economic Way of ThinkingAn Economic Way of Thinking

SECTION 1

6

Objectives:Objectives:Why is scarcity a basic problem of

economics?What issues must producers address to

distribute resources?Why do producers study productivity?

Scarcity and ChoiceScarcity and ChoiceSECTION 2

7

Scarcity forces people to decide how Scarcity forces people to decide how to use resources effectively. to use resources effectively.

Scarcity and ChoiceScarcity and ChoiceSECTION 2

8

Questions producers must address to Questions producers must address to distribute resources:distribute resources:what to produce how to produce for whom to produce

Scarcity and ChoiceScarcity and ChoiceSECTION 2

9

Producers study productivity to Producers study productivity to determine if resources are being used determine if resources are being used wisely.wisely.

Scarcity and ChoiceScarcity and ChoiceSECTION 2

10

Objectives:Objectives:Why is sacrifice an important element of

economic choice?What assumptions are involved in creating a

production possibilities curve?Why might future production possibilities

differ from current production possibilities?

SECTION 3

Opportunity CostsOpportunity Costs

11

Reasons sacrifice is an important Reasons sacrifice is an important element of economic choice:element of economic choice: forces people to make trade-offs results in opportunity costs

SECTION 3

Opportunity CostsOpportunity Costs

12

Assumptions involved in creating a Assumptions involved in creating a production possibilities curve:production possibilities curve: that the amount of available resources and

technology will not change during the time being studied

that all the resources being used are utilized as efficiently as possible

SECTION 3

Opportunity CostsOpportunity Costs

13

Reasons future production possibilities Reasons future production possibilities might differ from current production might differ from current production possibilities:possibilities:changes in technologychanges in the factors of production

SECTION 3

Opportunity CostsOpportunity Costs

14

Objectives:Objectives:What are the difficulties associated with

barter?Why is true self-sufficiency rare?What are the economic benefits of

interdependence?

SECTION 4

ExchangeExchange

15

Difficulties associated with bartering:Difficulties associated with bartering: relies on bargaining results in complicated transactions

SECTION 4

ExchangeExchange

16

Why true self-sufficiency is rare:Why true self-sufficiency is rare: requires a large supply of tools, equipment,

and raw materialsdemands extensive skills and knowledge in a

variety of fields

SECTION 4

ExchangeExchange

17

The economic benefits of The economic benefits of interdependence:interdependence:does not require countries to produce all

goods they consumeallows countries to specialize in the

production of certain goods while trading others

SECTION 4

ExchangeExchange

18

1.1. What is the difference between microeconomics and macroeconomics?

2.2. Why is scarcity important in economics?

3.3. What three production issues must an economic system address?

4.4. How can division of labor and specialization increase productivity?

5.5. Identify the assumptions on which the production possibilities curve is based.

6.6. Describe the benefits of interdependence.

Wrap-UpWrap-Up

CHAPTER 1