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Introduction to Economics

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Introduction to Economics The Basic Concepts of Economics – PowerPoint PPT presentation

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Title: Introduction to Economics


1
Introduction to EconomicsThe Basic Concepts of
Economics
2
Introduction
  • Microeconomics The study of how individuals
    make decisions and how these decisions interact.
  • Macroeconomics The study of the overall economy
    and its ups and downs.
  • Market vs. Command Economy
  • Invisible Hand vs. Government

3
Natural Resources
  • They were here long before man/woman ever set
    foot on earth
  • Natural Resources A Gift of Nature
  • Humans learned how to extract resources from the
    land and transform them from their original state

4
Trees Paper
5
Sand Glass
6
Sun Energy
7
We Live in a Finite World
  • No matter how much we conserve, if we keep
    consuming natural resources at our current rate,
    they will run out.

8
A Consumer Society!
  • The worlds people have consumed as many goods
    and services since 1950 as all previous
    generations put together
  • If everyone on our planet consumed resources at
    the rate of U.S. citizens, we would need 3 more
    planet earths to provide for all 6 billion
    people.

9
Renewable vs. Nonrenewable Resources
  • Conservation can the supply of renewable
    resources
  • Mining one ton of a nonrenewable resource
    depletes that resource by one ton
  • Before society has depleted a certain resource we
    may have abandoned using it.
  • Examples Coal and Flint

10
Economics is the Study of Choices
  • Productive Resources Anything that people can
    use to make or obtain what they want.
  • In economics we study how we use scarce resources
  • Choices can be painful

11
Land
12
Labor(The available time of workers)
13
Capital (, machinery, buildings, and other
man-made productive assets)
14
Human Capital (The educational achievements and
skill of workers)
15
How Do We Satisfy Our Wants?
  • Suppose we had an infinite supply of resources.
    Would a problem exist?
  • YES!
  • The basic problem in economics is not a lack of
    resources, but our limitless wants.

16
Scarcity
  • Unlimited Wants vs.
  • Limited Resources

17
Core Economic Principle 1 People Choose
  • We always want more than we can get and
    productive resources (human, natural, capital)
    are always limited. Therefore, because of this
    major economic problem of scarcity, we usually
    choose the alternative that provides the most
    benefits with the least cost.

18
Wants vs. Needs
  • Needs Survival needs, food, shelter, clothing,
    etc.
  • Wants Anything else

19
Were perpetually in a state of hunger.
  • We always want more stuff.
  • As a result, scarcity governs us.
  • Scarcity forces us to make choices and prioritize
    needs and wants.

20
Core Economic Principle 2All Choices Involve
Costs
  • The opportunity cost is the next best alternative
    you give up when you make a choice. When we
    choose one thing, we refuse something else at the
    same time.

21
Opportunity Cost
  • The value of the next best alternative that had
    to be given up for the alternative that was
    chosen.

22
When You Choose You Lose
23
Decisions at the Margin
  • How Much? Is a decision at the margin.
  • Either-or vs. How Much
  • How Much decisions involve a trade-off
  • A comparison of costs vs. benefits

24
Incentives Matter
  • When changes in the available opportunities offer
    rewards to those who change their behavior, we
    say that people face new incentives.
  • Economists are skeptical of any attempt to change
    peoples behavior that doesnt change their
    incentives.

25
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