I. What Is Economics?

A. Scarcity and the Science of Economics

1. TINSTAAFL (There is no such thing as a free lunch.)- Always something for something and never something for nothing!

2. The Fundamental Economic Problem

a. Scarcity- Society does not have the resources to meet all demands with supply.

3. Factors of Production- Provide a means of distribution for societies goods.

a. Land- "Gift of nature" or all natural resources

b. Capital- The tools and equipment of production.

1. Money

2. Hardware

c. Labor- People

1. Skills

2. Training

3. Flux- Death, Poverty, Economic Classes, etc.

d. Entrepreneurs- Risk of capital markets (profits)

4. Three Basic Questions

a. What to produce?- Needs vs. Wants

b. How to produce?- Assembly, Manufacture, Service, etc.

c. For whom to produce?- Who is my market? Why them?

5. The Meaning of Scope of Economics

a. Description- Economics is the study of human efforts to satisfy what appear to be unlimited and competing wants through the careful use of relatively scarce resources.

b. Analysis- Economic Class Structure

c. Explanation- If you know where you have been, you know where you are going.

d. Prediction- Anticipation of consequences.

B. Trade-Offs and Opportunity Costs (or Alternative Choices)

1. Trade Offs Among Alternatives

a. Risk reward analysis.

2. Opportunity Cost- The cost of the next best alternative use of money, time or resources when one choice is made rather than another.

3. Production Possibilities Frontier (PPF)- (See Chart on Page 16) When the labor force is fully employed, production is limitless???

a. How does the PPF expand?

1. Technology

2. Conflict

C. Basic Economic Concepts

1. Needs and Wants

a. Need- Basic requirement for survival (food, clothing, shelter)

b. Want- Is the means of expressing a need. For example- I need food, but I want a slice of pizza.

2. Goods, Services, and Consumers

a. Goods- Is a tangible commodity

1.Consumer Good- Final use by individual

2. Capital Good- Manufactured good to produce another good

3. Durable Good- A good lasting for more than three years

aa. Automobiles, Housing, etc.

4. Non-durable Good- A good lasting less than three years

aa. Clothing, Food, Perishables, etc.

b. Services- Work performed by someone else for your benefit

1. Doctors, Lawyers, Gardeners, Tutors, Hair-Stylist, etc.

c. Consumers- People who use goods and service to satisfy their wants and needs

1. Consumption- The process of using goods and service

2. Conspicuous Consumption- The use of a good to impress others.

aa. Example- A real estate agent who drives a Mercedes.

3. Value, Utility, and Wealth

a. Paradox of Value- Why is that baseball card worth so much??? (Supply and Demand mixed with Social Trends)

b. Utility- The capacity for a good or service to be useful to someone (scarcity)

c. Wealth- The sum of economic products that are tangible, scarce, useful and transferable from one person to another. Goods are considered wealth, whereas future services are not.

4. Productivity- The efficient use of good and services

a. Specialization of Labor- The productive inputs that make the best product for the most affordable costs

1. Division of Labor

b. Human Capital- The sum of skills, abilities, health and motivation of people

5. Economic Interdependence

a. The Circular Flow of Economic Activity (Markets)

6. Investing in the Future (Standards of Living)

a. The Road Ahead- Free Enterprise Economy: A road filled with success, errors, rich, poor, educated, uneducated, the lucky, the unexpected