What is a choice? What are some examples of choices we make?
The Definition of Economics
The study of how individuals and societies choose to allocate (use) scarce resources
What you give up whenever you make a choice. AKA "the second best option"
Individuals consider the value of what is being given up when making a choice.
"An opportunity cost is an opportunity lost"
Opportunity Cost Example:
Bob has two hours of time after school before soccer practice. He has two things he could do during those hours:
A) Play his new PS5
B) Spend it studying for his math test tomorrow
Which should he pick???
Spend it playing his new PS5
Study for his math test
What does Bob give up if he chooses to play his PS5?
What does Bob give up if he chooses to study for his math test?
The things (factors of production) that are used when producing goods and services
Which of the following are things you think we use when we create goods and services?
The 4 Factors of Production
Natural: Land, raw resources (water, plants, animals, etc.)
Human: People (Labor)
Capitol: Machinery, Tools, and Buildings used to produce
Entrepreneurship: new business which combines other factors to make a profit.
Production is the combining of resources/factors of production (natural, human, capitol, and entrepreneurship) to make goods pr provide services.
What goods and services are produced is determined by what resources are available and consumer preferences.
This is the using of goods and services. Consumer preferences and price determine what is purchased and consumed.
What does it mean when something is scarce?
The Scarcity Problem
We have unlimited wants.... but our resources are limited. We do not have all the resources to produce everything we want.
Scarcity forces consumers, producers, and governments to make some difficult choices.
Example: Nearly every teenager wants a PS5 right now. The producers only have enough resources to put just a few on the market right now.