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WHAT IS ECONOMICS?
1C H A P T E R
ECONOMICS
The social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants.
ECONOMICS
The social science concerned with the efficient use of scarce resources to achieve the maximum satisfaction of economic wants.
WHY STUDY ECONOMICS• Most __________ decisions involve
economics. • An understanding of economics
and government are the keys to participatory citizenship.
• Learn analytical and observational skills that are important in the workplace.
• Business managers or owners need these skills and understanding.
• Make better financial decisions with your investments.
• Foundation for careers in accounting, business, finance, marketing, or public policy.
THE FOUNDATION OF ECONOMICS
SOCIETY HAS VIRTUALLYUNLIMITED WANTS...
BUT LIMITED OR SCARCERESOURCES!
SOCIETY HAS VIRTUALLYUNLIMITED WANTS...
THE FOUNDATION OF ECONOMICS
GOODS & SERVICES PROVIDE...
UTILITY
WANT
GOODS & SERVICES PROVIDE...
UTILITY
WANT vs. NEED
GOODS & SERVICES PROVIDE...
UTILITY
THE ECONOMIC WAY OF THINKING
ScarcityThe world has limited
resources.These resources are
desirable.TINSTAAFL There is no such thing as a free lunch
WHAT IS THE DIFFERENCE BETWEEN A TRADE-OFF AND OPPORTUNITY COST?
Trade-Off
An exchange of one or more thing(s) in return for another.
Opportunity Cost
The value of the next-highest valued alternative or the forgone cost.
WHAT IS THE DIFFERENCE BETWEEN A TRADE-OFF AND OPPORTUNITY COST?
Trade-Off
An exchange of one or more thing(s) in return for another.
Opportunity Cost
The cost of passing up the next best choice.
FRIDAY NIGHT OPTIONS
Go out with friends
Stay home and watch TV
Go on a date
Study economics
Attend the basketball game
The one we pick is our choice, the rest become Trade-offs.
The “next best” alternative becomes the Opportunity Cost.
FRIDAY NIGHT OPTIONS
Go out with friends
The one we pick is our choice, the rest become Trade-offs.
The “next best” alternative becomes the Opportunity Cost.
GO OUT ON A DATE
The Opportunity Cost of going out on a date is what you’ve lost by not going out with friends.
Excitement Fun
Your decision was based on getting more utility on your date.
That’s the “incentive”
ANY OTHER COSTS?
Dating is expensive. Let’s say you spend $30. You could have spent that $30 on something else.
SO OUR OPPORTUNITY COST IS…?The lost fun you would have had with your friends.
The cash you spent on your date.
