What is the Basic Economic
Problem?
Unlimited ____________ vs. Limited _______________
You cannot have everything you want. Therefore:
What satisfies economic wants?
Are tangible items that satisfy our wants.
Such as: cars, TVs, computers, clothes, etc.
Are goods for immediate
consumption that satisfy
our wants directly.
Examples?
Are goods that satisfy our wants
indirectly; goods used to produce
other goods. Examples?
What else satisfies our wants?
Intangible items such as:
Legal advice/representation
Medical and dental work
Tax preparation
Painting and repair work
House cleaning
Factors of Production
Natural resources such as farm land, coal, iron ore,
trees, etc.
Human mental and physical efforts in the production
process. (those who do the work!)
Goods used to produce other goods – machinery,
equipment, tools
Risk-taking, initiative; the ability to
combine the other factors of productions to
start a business and produce a good or
service. Examples?
Economics defined:
• The study of choice
• The study of how society deals with the
problem of scarcity
• The study of how scarce resources are used
in the production, distribution and
consumption of goods/services to maximize
the satisfaction of human wants
Three Basic Economic ????
Are goods to be
produced?
Basic Economic Systems:
Government
Supply and
Demand
Government
Supply and
Demand
Government
Supply and
Demand
• This is also a economic theory, but it is not
practiced in the theoretical form today.
• What we refer to as communism is a
political system (government) and they
practice socialism as their economic system
• Most economies in the world are not pure
systems – contain a mixture of both types of
economic systems – one usually is
dominant
• More specifically, mixed economies are
those with basically a capitalism based
system but a significant amount of
government regulation. Examples?
Scarcity is the problem of using
_?_ resources to fulfill people’s
_?_ wants.
A.
B.
C.
D.
E.
limited; unlimited
unlimited; unlimited
unlimited; limited
limited; limited
None of the above
Make a Word wall
• Pick a vocab word from the notes and create
a Word wall.
• Word at top
• Definition
• Sentence using the word
• Picture
Welcome to Economics!
Wednesday, September 3
• Did you know that someone who…
– Does not graduate high school on average
makes $21,000 a year
– Graduates from high school (or gets a GED)
makes $29,900 a year
– Gets an associates degree (2 yr degree) makes
$37,000
– Gets a bachelors degree makes $45,000
Because of scarcity,
choices must be made:
• To get something, you
must give up something
• What is given up when
making a choice
• Next best alternative not
taken
• Foregone opportunities
Saturday Night
• Current Status:
• Work full time
• Annual salary:
$10,000
• Living Expenses:
$1000
• Explicit Costs of
College:
• Tuition: $2000
• Books: $400
• Living Expenses:
$5000
Dilemma: Work full-time or attend college full-time?
If you were an economist, ceteris paribus,how would you
determine the costs of each decision?
• Suppose you have a friend who is currently working as a salesperson in a
local store that sells personal computers. This friend is thinking about
going back to school full-time to complete work on a computer science
degree. She explains to you that she earns $18,000 per year in her
current job, and she estimates tuition will cost $1,100 per year. In
addition, she estimates fees, supplies, books and miscellaneous expenses
associated with attending school will run $900 per year. She wants to
attend a local university located directly across the street from the store
where she currently works. She claims that she pays $300 per month for
rent and utilities and that she spends about $225 per month on food.
• Thinking as an economist, calculate and explain to your friend the cost to
her of a year at school full-time. Consider both implicit and explicit costs
(ceteris paribus).
Janine is an accountant who makes $75,000 a year.
Robert is a recent high school graduate who earns
$10,000 per year. Ceteris paribus, who is more
likely to stand in a long line to get a concert ticket?
•
•
•
•
•
Janine, because her opportunity cost is lower
Janine, because her opportunity cost is higher
Robert, because his opportunity cost is lower
Robert, because his opportunity cost is higher
Janine, because she is better able to afford the cost of the ticket
Susie Johnson can take a job paying $10,000 a year
when she graduates from high school, or she can go
to college and pay $5000 a year for tuition.
Measured in dollars, what is her opportunity cost of
going to college next year?
A.
B.
C.
D.
E.
$0
$5000
$10,000
$15,000
$20,000