The study of how people allocate their limited resources to satisfy their unlimited wants . The study of how people make choices Resources .
Resources : Things used to produce other things to satisfy people’s Needs: necessary for survival Air, food, shelter Wants: item we desire but do not NEED to survive Choices: Choosing/opting/allocating resources for selective/essential needs/wants .
Wants : Things used to produce other things to satisfy people’s wants . What people would buy if their incomes were unlimited . With limited income (resources), people must make choices to satisfy their wants. We never have enough of everything, including time to satisfy our every desire. Individuals, businesses, and nations face alternatives, and choices must be made. Economics studies how these choices are made.
Five Economic Questions
WHAT to produce (make)?
▪ HOWMUCH to produce (quantity)?
▪︎HOW to Produce it (manufacture)?
▪ FORWHOM to Produce (who gets what)?
▪︎WHO gets to make these decisions?
Choices
Since ALL resources, goods, and services are limited –As Such, WE MUST MAKE CHOICES!!!! We make choices about how we spend our money, time, and energy so we can fulfil our NEEDS and WANTS.
What are NEEDS and WANTS?
NEEDS – “stuff” we must have to survive, generally: food, shelter, clothing.
WANTS – “stuff” we would really like to have (Fancy food, shelter, clothing, big screen TVs, jewelry, conveniences . . . Also known as LUXURIES
Production (Economics)
Production is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (output).
It is the act of creating an output, a good or service which has value and contributes to the utility of individuals.
The area of economics that focuses on production is referred to as production theory, which in many respects is similar to the consumption (or consumer) theory in economics
4 Factor of Production
LAND – Natural Resources
Water, natural gas, oil, trees (all the stuff we find on, in, and under the land)
LABOR – Physical and Intellectual Labor is manpower
CAPITAL -Tools, Machinery, Factories The things we use to make things Human capital is brainpower, ideas, innovation
ENTREPRENEURSHIP – Investment $$$ Investing time, natural resources, labor and capital are all risks associated with production
Production
A measure of the production of an entire country in one year is GDP .
The total $ value of ALL final Goods and Services produced in a country in a year. (GROSS DOMESTIC PRODUCT)