Economics 101Economics 101

Unit 4 NotesUnit 4 Notes

What Does “Economics” Mean?

--Economics is the study of MONEY!

Needs & Wants

--We all must have a certain amount of food, water, clothing, & shelter to survive—NEEDS!

--Anything beyond these needs is a WANT

--Need: something required for survival; well defined & limited

--Want: something desired; endless

Opportunity Costs

--People have limited incomes; this forces us to make choices about how to spend our money

--Every choice has costs--Economists also count the

“choice” we didn’t make as the opportunity cost, or trade-off

--Opportunity Cost: the thing that is given up when something else is chosen

What Do We Spend $ On?

--How people spend their limited resources depends on their needs, likes and dislikes, income, available substitutes, and the price of goods they want

--Goods: any manufactured product, like food, shoes, TVs, etc.

What Does This Mean for Businesses?

--Like people, governments and businesses face limits and must make choices

--Businesses have limited profits, and countries have limited resources

--Resources include workers, money from taxes, natural resources, & machinery

--Because everyone faces limited resources, or scarcity, everyone makes choices--Scarcity: not enough resources, time, or money for all needs and wants

Economic Choices

INDIVIDUALS:--Some choices individuals make

include:--whether to save or spend their money--how to spend their money--how to divide their time between work and leisure

Economic ChoicesBUSINESSES:--Businesses have to decide what to

make, how much of it to make, how to make it, and what to do with their profits

--Profits: money earned beyond the cost of making and selling the product

--Profits can be taken as owner income, divided among workers, or invested in the business

--Invested: to commit money with the hope of making more money

Economic Choices

GOVERNMENTS Must Decide:--which natural resources to

preserve and which to sell--how much to tax--how to spend the nation’s

income--between spending on things

such as the military, education, roads, health services, etc.