Introduction to Economics

What is Economics?
- The study of how society manages its scarce resources.
- The study of choices made by market participants.
- Why people need to make choices? Because of scarcity.
What is Scarcity?
- Refers to the fundamental economic problem of having unlimited human wants in a world of limited resources.
Four Types of Resources:
- Land:
  - All natural resources used in production.
  - In return, land owners receive rent (rental income).
- Labor:
  - The mental and physical effort used in production.
  - In return, workers receive salary and wages.
- Capital:
  - All man-made goods used to produce other goods and services (e.g., machinery, buildings, tools).
  - In return, capital owners receive interest.
- Entrepreneurial ability:
  - The ability to use land, labor, and capital in an innovative way to produce goods and services.
  - This involves risk-taking and organization.
  - In return, entrepreneurs receive profit/loss.

Economists study three main areas:

How people make decisions (e.g., work, buy, save, invest).
How people interact with one another.
The forces and trends that affect the economy as a whole (e.g., growth in average income, unemployment rates, inflation rates).