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WHAT IS ECONOMICS???Economics – the study of how individualsand societies make decisions about waysto use scarce resources to fulfill wants does THAT mean?!!??!! 4 Economics: how to meet the unlimited wants of a society with its limited resources. Demand: The amount of goods consumers are willing and able to buy at a .
The Study of EconomicsMacroeconomics– The big picture: growth, employment, etc. – Choices made by large groups (like countries)Microeconomics– How do individuals make economic decisions 5.
ECONOMICS: 5 Economic QuestionsSociety (we) must figure outWHAT to produce (make)HOW MUCH to produce(quantity)HOW to Produce it(manufacture)FOR WHOM to Produce(who gets what)WHO gets to make thesedecisions? 6. What are resources?Definition: The things used to make othergoods 7.
BUT, there’s a Fundamental Problem:SCARCITY: unlimited wants and needs but limited resources 8. Choices, Choices Because ALL resources, goods, and services are limited – WE MUST MAKE CHOICES!!!! 9.
Why Choices?We make choices about how we spend our money, time, and energy so we can fulfill our NEEDS and are NEEDS and WANTS? 10. Wants and Needs, Needs and WantsNEEDS – “stuff” we must have to survive,generally: food, shelter, clothingWANTS – “stuff” we would really like tohave (Fancy food, shelter, clothing, bigscreen TVs, jewelry, conveniences .
TRADE-OFFSYou can’t have it all (SCARCITY – remember?) so you have to choose how to spend your money, time, and energy.
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Trade-Offs, YOUR JOURNAL: What COULD you havedone instead of come to school today?These are all Trade-Offs! Thanks for beinghere! 14 5 Nov 2012 - Presentation Courses · PowerPoint Courses; by LinkedIn Learning INTRODUCTION TO ECONOMICSChoices, Choices, Choices, . to produce (make)HOW MUCH to produce(quantity)HOW to Produce it(manufacture)FOR WHOM to Produce(who gets Q: What is the opportunity cost of buying pizza?.
A special kind of Trade-Off is an OPPORTUNITY COST =The Value of the Next Best Choice(Ex: Sleeping is the opportunity cost of studying for a test) 15.
Opportunity Costs This is really IMPORTANT – when you choose to do ONE thing, its value (how much it is worth) is measured by the value of the NEXT BEST CHOICE. – This can be in time, energy, or even MONEYIf I buy a Then Ipizza… can’t afford the movies… Q: What is the opportunity cost of buying pizza? 16.
ProductionSo how do we get allthis “stuff” that wehave to decide about?Decisions, decisions… 17. PRODUCTION, tion is how STUFF – Goods andmuch stuff an dual, business,country, even the Goods – tangible (youWORLD makes.
can touch it) products we can buyBut what is “STUFF”? Services – work that is performed for others 18. Factors of ProductionSo, what do we need to make all of this Stuff? 19.
4 Factors of ProductionLAND – Natural Resources– Water, natural gas, oil, trees (all the stuff we find on, in, and under the land)LABOR – Physical and Intellectual– Labor is manpowerCAPITAL - Tools, Machinery, Factories– The things we use to make things– Human capital is brainpower, ideas, innovationENTREPRENEURSHIP – Investment $$$– Investing time, natural resources, labor and capital are all risks associated with production 20. THREE parts to the Production ProcessFactors of Production – what we need to makegoods and servicesProducer – company that makes goods and/ordelivers servicesConsumer – people who buy goods and services(formerly known as “stuff”) Which Came First? 25.
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Capital Goods and Consumer GoodsCapital Goods: areused to make othergoodsConsumer Goods:final products that arepurchased directly bythe consumer 27 Economics is the branch of knowledge concerned with the production, (free market is one where consumers may buy what they like and producers may .
CHANGES IN PRODUCTIONSpecialization –dividing up productionso that Goods areproduced efficiently Hardee’s makes hamburgers, not shoes!!Nike makes shoes, nothamburgers 28.
CHANGES IN PRODUCTIONDivision of Labor –different peopleperform different jobs You do yourto achieve greater job, and I willefficiency (assembly do my Job and we will be moreline). CHANGES IN PRODUCTIONConsumption – howmuch we buy(ConsumerSovereignty) The DELL store is empty because…. CHANGES IN PRODUCTIONIf we INCREASE land, labor, capital weINCREASE production– Many entrepreneurs invest profit back into productionIf we DECREASE land, labor, capital weDECREASE productionBUT WHY would we ever DECREASEproduction? 31. again A measure of the production of an entire country in one year is GDPThe total peso value of ALL final Goods and Servicesproduced in a country in a year.
787,624(millions of US dollars) 12 India 785,468 1 United States 12,455,068 13 Mexico 768,438 2 Japan 4,505,912 14 Russian Federation 3 Germany 2,781,900 763,720 4 China 2,228,862 15 Australia 700,672 5 United Kingdom 2,192,553 16 Netherlands 594,755 6 France 2,110,185 a 17 Switzerland 365,937 7 Italy 1,723,044 18 Belgium 364,735 8 Spain 1,123,691 19 Turkey 363,300 9 Canada 1,115,192 20 Sweden 354,115 10 Brazil 794,098 21 Saudi Arabia 309,778 34.
Costs and RevenuesRevenues – the totalamount of peso acompany or thegovernment takes in.
Costs and RevenuesFixed Costs – theamount of money abusiness MUST pay eachmonth or year (like rentand Capital expenses).
Costs and RevenuesVariable Costs – theamount of money abusiness pays thatchanges over time (Laborand Raw Materials).
Costs and RevenuesTotal Costs = Fixed +Variable Costs.
Costs and Revenues - ChartMarginal Costs – theadditional Cost of theNEXT UNIT produced.
Costs and RevenuesProfit – the differencebetween Total Costsand Revenues. Thisis WHY you’re inBUSINESS (ProfitMotive!)– Profit=Revenues-Total cost– Profit Motive=why you are in business---to make MONEY (principles of Capitalism) 42.
Costs and RevenuesCost Benefit Analysis– weighing theMarginal Costs Marginal Benefitsof producing an item Marginalor making any Marginal Costseconomic decision.
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Cost-Benefit AnalysisImmediate or short term satisfaction canlead to missing the long-term benefits Economics is the study of the making, buying, and selling of goods or services. People started using coins, as well as paper money for trade. Want to trade .
#7 For ExampleImmediate spending on cheap stuffinstead of long-term savings will lead tolower economic prosperity. Traditional EconomiesDef: EconomicQuestions answered bycustomPredominatelyAgricultural Developing or “3rdWorld”Trade and barterorientedLow GDP & PCI (percapita income = .
Command EconomiesDef: Economicquestions answered bythe governmentVery little economicchoiceNo private ownershipCommunismOld Soviet Union, oldCommunist China,Cuba and North Korea 47.
Karl Marx19th century GermaneconomistAuthor of “CommunistManifesto” and “ DasKapital”– Government should control economy and distribute goods and services to the peopleFounder ofrevolutionarysocialism andcommunism 48. Communism FallsMarket reforms in China in themid of the Berlin Wall in se of the Soviet Market Capitalism (w/some Mixed Economies) theonly show in town.
Free Market (Capitalist) EconomiesEconomic questionsanswered byproducers andconsumersLimited governmentinvolvementPrivate property rightsWide variety ofchoices and productsU.
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)Laissez-faire - Government stays out ofbusiness practices “hands off” to let themarket place determine production,consumption and dual freedom and choiceemphasized.
Principles of CapitalismCompetition – morebusinesses meanslower prices andhigher qualityproducts forconsumers (US!) tobuy.
Principles of CapitalismVoluntary Exchange –businesses andconsumers MUST befree to buy or sellwhat and when theywant.
Principles of CapitalismPrivate Property – Individuals and businesses MUST be able to get the benefits of owning their OWN property.
Principles of CapitalismConsumerSovereignty –consumers get tomake free choicesabout what to buyand this helps driveproduction(Demand drivesSupply). Principles of Capitalism Profit Motive – people want to make or save $$$$.
Principles of CapitalismSocial Safety Net –“Mixed Economy” ideathat says the governmentshould NOT allow peopleto suffer in economiccrisis (natural part ofCapitalism’s “BusinessCycle”), but providesecurity instead – SocialSecurity, UnemploymentInsurance, etc Economics is the study of the making, buying, and selling of goods or services. Some people One person might have traded five rabbits for milk and eggs..
Mixed Economy/SocialismGovernment involvementand ownership and controlof property, of decisionmaking, and ment control ofbusinessSocial “safety net” forpeopleSocialismCommon in Europe, LatinAmerica, and Africa 59. John Maynard KeynesThe Invisible Handdoesn’t always work.
“The long run is amisleading guide tocurrent affairs.
)Government should intervene in economicemergencies through tax and spending(Fiscal Policy) and changing the moneysupply (Monetary Policy) 20 Nov 2012 - When presenting an economics research paper or report using Powerpoint, captivating your audience and conveying a clear message or .
This is done to smooth out the businesscycle (expansion and recession) and keepinflation low. LABORWages – what companies Salary – the amount ofpay employees for their pay a person gets over alabor (usually based upon year (especially foran hourly rate).
Blue Collar White CollarManufacturing, work with ‘Office’ jobshands Usually control productionUsually the ‘labor’ inproduction 63.
When Production DecreasesDownsizing – laying off employees to save rcing – sending jobs and manufacturing overseasor contracting to outside companies to save ptcy – government allows business to restructureit’s debt, but now all profits go to paying off debt ratherthan to the owners/ of Business – lose all your business, money, current trend in the U. How does ‘Labor’ protect itself?Labor Unions: organization of workerswho have banded together to achievecommon goals – Wage protection – Workplace safety – Benefits – Job protection 65.
Collective Bargaining and StrikesCollectiveBargaining– Representatives of the Union and the company negotiate a contract for the workers; usually they rely on compromiseStrikes– When an agreement can’t be reached, workers stop working to try to force the hand of the company