The Fundamentals of Economics The Fundamentals of Economics Main Idea Introduction to Economics Notes Economics is the study of how individuals families businesses and societies use limited resources to fulfill their unlimited wants ID: 445124
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Slide1
Unit 7: Foundations of Economics:
The Fundamentals of EconomicsSlide2
The Fundamentals of Economics:
Main Idea:
Introduction to
Economics
Notes:Economics is the study of how individuals, families, businesses, and societies use limited resources to fulfill their unlimited wants.There are 2 parts of economics:MicroeconomicsMacroeconomicsSlide3
The Fundamentals of Economics:
Main Idea:
Introduction to
Economics (cont’d.)
Notes:Microeconomics is the study of the behavior & decision making by small units.EX: individuals, families, firmsMacroeconomics is the study of the economy as a whole—the behavior and decision making by large units.EX: governments Slide4
The Fundamentals of Economics:
Main Idea:
Wants, Needs, and
Choices
Notes:Economists define a need as anything necessary for survival.EX: food, water, shelterA want
is anything else that is not necessary to survive.
EX: cars, electronics, etc.
We balance our
wants
and
needs
by making
choices—how we utilize our resources to satisfy our wants/needs.Slide5
The Fundamentals of Economics:
Main Idea:
Factors of Production
Notes:
Scarce resources refer to the factors of production, or the resources needed to produce goods and services.There are essentially 4 basic factors of production:LandLabor
Capital
Entrepreneurship Slide6
The Fundamentals of Economics:
Main Idea:
Factors of Production:
Land
Notes:In economics, the term land refers to the natural resources that exist without human intervention.EX: geographical land/water, fish, animals, trees, mineral deposits, etc.Slide7
The Fundamentals of Economics:
Main Idea:
Factors of Production:
Labor
Notes:Labor is the work people do (also called human resource). Labor includes the work people do to produce goods
(tangible objects that can satisfy people’s wants/needs) and
services
(actions that can satisfy people’s wants/needs)Slide8
The Fundamentals of Economics:
Main Idea:
Factors of Production:
Capital
Notes:Capital refers to manufactured goods used to make other goods and produce other services. EX: Machines, tools, etc.When capital is combined with land and labor, the value of all 3 factors of production increases.EX: uncut diamond (land) + diamond cutter (labor) + diamond-cutting machine (capital) = highly valued gemSlide9
The Fundamentals of Economics:
Main Idea:
Factors of Production:
Capital (cont’d.)
Notes:Capital also increases productivity by allowing goods/services to be produced faster and more efficiently.Slide10
The Fundamentals of Economics:
Main Idea:
Factors of Production:
Entrepreneurship
Notes:Entrepreneurship is when individuals take risks to develop new products and start new businesses in order to make profits.30% of new businesses fail.Slide11
The Fundamentals of Economics:
Main Idea:
Technology
Notes:
Some modern economists would add technology to the list of factors of production.Technology is the use of science to develop new products and new methods for producing and distributing goods and services.