Basic Microeconomics (lesson 1)

The study of how individuals and societies make decisions about ways to use scarce resources to fulfill wants and needs.

The big picture: growth, employment, etc. choices made by large group (like countries.)

How do individuals make economic decisions.

What are the five economic questions?

Unlimited wants and needs and limited resources.

Stuff we must have to survive, generally: food, shelter, clothing

Stuff we would really like to have (fancy food, shelter, clothing, big scree TVs, jewelry, convenience’s, also known as luxuries.

You can’t have it all (scarcity remember?) so you have to choose how to spend your money, time and energy. These decisions involve picking one thing over all the other possibilities

What is the special kind of trade off?

The value of the next best choice.

It is how much stuff an individual, businesses, country even the world makes.

Goods and services

Tangible (you can touch it) products we can buy

Work that is performed for the others.

What are the four factors or production?

Natural resources: water, natural gas, oil, trees (all the stuff we find on, in and under the land)

Physical and intellectual, it is also a manpower

Tools, machinery, factories. The things we use to make things. Human capital is brainpower, ideas, innovation

Investment. Investing time, natural resources labor and capital are all risk associated with production.

What are the three parts of production process?

What we need to make goods and services

Company that make goods and/or deliver services

People who buy goods and services (formerly known as stuff)

Are used to make other goods

Final products that are purchased directly by the consumer.

What are the changes in production?

Dividing up production so that goods are produced efficiently

Different people perform different jobs to achieve greater efficiency (assembly line)

How much we buy (consumer sovereignty)

A measure of the production of an entire country in one year is.

GDP (Gross Domestic Products)

The total peso value of all final goods and services. Produced in a country in a year.

What ate the cost and revenues?

The total amount of money it takes to produce an item (to pay for all factors of production)

The total amount amount of peso a company or the government takes in.

The amount of money a business must pay each month or year (like rent and capital expenses)

The amount of money a business pays that changes over time (labor and raw materials

Fixed+variable costs

The difference between total costs and revenues. This is why you’re in a business (profit motive!)

Why you are in a business - to make money

Weighing the marginal costs vs. the marginal benefits of producing an item or making ang economic decision. If the benefit is greater than the cost, then business does it.

What are the two comparative economies?

Economic questions answered by customs.

Economic questions answered by the government.

He was the 19th century german economist. Author of “communist manifesto” and “das kapital” founder of revolutionary socialism and communism

Economic questions answered by producers and consumers. Limited government involvement. Private property rights.

He was an 18th century Scottish economist. Published “The Wealth of Nations” in 1776. Explained the working of the free market within capitalist economies. Invisible hand of the market.

Government stays out of business practices “hands off” to let the market place determine production, consumption, and distribution

What are the principles of capitalism?

More business means lower prices and higher quality products for consumers (US!) to buy.

Business and consumers must be free to buy or sell what and when they want

Individuals and businesses must be able to get the benefits of owning their own property. Government doesn’t control it.

Consumers get to make free choices about what to buy and this helps drive production (demand drive supply)

People want to make or save their “self interest” motivates capitalism.

“Mixed economy” idea that says the government should not allow people to suffer in economic crisis.

•Government involvement and ownership and control of property, of decision making, and companies

•Government control of business

•Social safety net for people

•Socialism

•common in Europe, Latin, America and Africa

•The invisible hand doesn’t always work

•The long run is a misleading guide to current affairs. In the long run we are all dead or the trouble is people eat in the short run.

What are the labor issues?

What companies pay employees for their labor (usually based upon an hourly rate)

The amount of pay a person gets over a year (especially for professional jobs)

Laying off employees to save costs.

Sending jobs and manufacturing overseas or contracting to outside companies to save money.

Government allows business to restructure its debt, but now all profits go to paying off debt rather than to the owners/investors

Lose all your business, money and profit.

How does labor protect itself?

This is the organization of workers who have banded together to achieve common goals. 1? 2? 3? 4?

Representative of the union and the company negotiate a contract for the workers: usually they rely on companies

When an agreement can’t be reached, workers stop working to try to force the hand of the company.