Economics class notes
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Scarcity Implies Tradeoffs

Economics is the study of choice under conditions of scarcity.

Scarcity exists when we desire more of something than we can have.

  • What is Scarce for you?
  • What is the difference between scarce and rare?

You make a tradeoff when you give up one thing to get something else. This means you make tradeoffs to overcome scarcity.

What is the cost of owning a car you will never drive?

Opportunity cost

The opportunity cost of a choice is the value of the next best alternative given up when that choice is made.

  • If I gave you $50, what would you do with it? What is this decision’s opportunity cost?
  • Would it change if you earned the money rather than it being gifted to you?

Needs and Wants

Needs are minimal requirements of things such as food, water, and shelter that are necessary for survival.

Wants are things that are desired but are not essential to life.

An economy coordinates the production and distribution of goods and services.

  • How can a society coordinate production and distribution?

Goods and Services

Goods are physical items produced in an economy such as jeans

Services are activities produced in an economy such as education

Resources

Resources are the basic elements from which all goods and services are produced

  • Land is anything drawn from nature for use in production of goods and services

  • Labor is the time and effort people contribute to production

  • Capital is anything long lasting that is created by humans for use in production, when money is used to make more money, it functions as capital

    • Physical capital -- is any long-lasting good that is used to make other goods and services these are the means of production

    • Human capital -- The skills and knowledge of workers

  • Entrepreneurship is the willingness of people to organize, operate, and assume the risks involved with business ventures.