What is Economics?

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What is Economics?
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I. What is Economics?

• A. Definition Economics is a social science that
  deals with how consumers, producers, and
  societies choose among the alternative uses of
  scarce resources in the process of producing,
  exchanging, and consuming goods and services

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II. What do we mean by scarce resources?

• A. Scarcity refers to the finite quantity of
  resources that are available to meet societys
  needs

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B. What are resources?

• 1. 3 kinds
• a. Natural resources (land)
• land
• water
• minerals
• biological

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• b. Human resources (labor)
• c. Manufactured resources (capital)
• machines equipment
• structures

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C. Because resources are scarce we have to make
choices about how best to use them

• 1. Choice has a time dimension
• a. Going to college today increases earning
  potential in the future

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2. Choice has an opportunity cost

• a. Interest that could have been earned from
  money spent on a car
• b. Salary that could have been earned at a job
  instead of going to college

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3. Choice leads to specialization

• a. Choose to use resources for what they are
  best suited for
• b. Teacher pays someone to provide medical
  advise, work on car, etc.
• c. U.S. exports grains and imports coffee

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III. 2 branches of economics

• A. Microeconomics
• 1. Focuses on the economic actions of
  individuals or specific groups

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• B. Macroeconomics
• 1. Focuses on aggregates, totals, big groups
• a. Wealth of a whole country
• b. Policies that effect the nation
• growth of the economy
• inflation
• unemployment
• monetary policy
• fiscal policy

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IV. Alternative economic systems

• A. Definition of an economic system The
  institutional means by which resources are used
  to satisfy human desires.

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• 1. Institutions
• a. Laws
• ex protecting private property
  enforcing contracts
• b. Habits customs
• ex businesses display their prices
  consumers usually pay that price
• c. Ethics
• ex bureaucrats give you a license for a
  business without being paid a bribe

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B. Capitalism

• 1. A free market economic system in which
  individuals own resources have the right to
  employ their time resources however they
  choose, with minimal legal constraints from
  government.

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C. Socialism

• 1. A centrally planned economic system in which
  resources are generally collectively owned
  government decides how resources are to be used.

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D. Mixed economic system

• 1. An economic system in which some markets are
  not entirely free to determine price. Government
  may control selected markets a welfare system
  may influence the labor market.

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• 2. The U.S. is mostly a capitalist system with
  several aspects of a mixed economy.
• a. Minimum wage law controls minimum price paid
  for labor
• b. Prices controlled in some ag and utility
  markets