Introduction to Economic Principles and the Problem of Scarcity

Introductory Economics and Course Overview

• The material covered in the initial seminar is included on the first exam. This content may be new to some students or a review for those who have previously taken economics courses.

• Common topics discussed in high school economics often include:

  • Supply and Demand.
  • The movement of money through life.
  • Gross Domestic Product (GDP).
  • Personal finance (saving, budgeting, the dangers of debt, and principles such as those from Dave Ramsey).

• Distinctions in academic focus:

  • While personal finance and investing in the stock market are valuable to learn, they are technically disciplines of finance rather than economics.
  • This specific course focuses on core economic principles such as supply and demand and GDP, rather than personal finance.

The Evolution and Origin of Money

• Money is a good that has a specific purpose within a society, often emerging naturally rather than being created by a government.

• The Barter System:

  • In early societies, people traded goods directly for other goods (e.g., trading corn for salt).
  • The process of bartering leads to the emergence of money when individuals recognize that certain goods are more universally desired.
  • Example: If multiple people seek salt not for consumption, but to trade it for other goods, salt begins to function as money in that society.

• Natural Emergence of Money:

  • Because individuals look for what others are looking for, a specific good (like salt or precious metals like gold) becomes money through human action and behavior.
  • Society eventually began stamping precious metals into coins and featuring faces on them for specific functional reasons.

Defining Economics and Markets

• Market: A market is any environment where people are buying and selling from one another. Examples include:

  • A local farmer’s market.
  • Online markets like Amazon.
  • The stock market (though "the market" is often used narrowly to refer only to this).

• Economics: The study of how groups of people (societies) with limited resources decide how those resources are used.

The Four Categories of Resources

Resources are the raw materials or inputs available to produce things of value (food, shelter, etc.). In economics, they are divided into specific categories:

• Land: This category includes all natural resources that occur naturally in the world. Examples include cattle, oil, corn, and gold.

• Labor: This refers to human efforts used in the production process.

• Capital: This category includes tools and skills used to produce other things. It is subdivided into:

  • Physical Capital: Tools that do not occur naturally in nature, such as a grill used to make a hamburger.
  • Human Capital: The knowledge and skills human beings acquire over time, such as learning how to safely butcher a cow or grill meat to a specific temperature.

The Fundamental Economic Problem: Scarcity

• Scarcity is the fundamental problem that economists deal with. It refers to the fact that resources are limited ($scarce = limited$).

• Abundance vs. Scarcity: Even things that are relatively abundant are considered scarce if they have a limit.

  • Example: Clean air is relatively abundant, but it is scarce. This is evidenced by conflicts between local communities and plants that pollute, as people fight over the use of a limited amount of clean air.

• The Hypothetical World of Abundance: If resources were unlimited (no scarcity):

  • Nothing would have a cost (though items would still have value).
  • No choices would be necessary. If you wanted heart surgery, you could have it without affecting anyone else's ability to have it.
  • In reality, one person's use of a resource affects another person's ability to use it, imposing costs due to scarcity.

The Family as the Simplest Society

• A society is a group of people. The simplest unit of a society is the family or the household.

• Resources within a family:

  • Human efforts (labor): For example, a father (an economist) and a mother (Nicole, a bionicle engineer) contribute labor. Their children also have varying degrees of labor potential (e.g., $10$ and $11$-year-old boys who mow the yard, versus $5$ and $7$-year-old daughters).
  • Human capital: Knowledge and skills acquired through education and experience.
  • Natural resources: Theoretically, land or cattle a family might own.

• Economic Decisions for the Family:     Families must decide how to allocate their scarce resources by answering three questions:

  1. What will be produced/valued? (e.g., healthcare, education, shelter, or a vacation).
  2. How will it be produced? (e.g., providing Christian education via homeschooling by the mother versus both parents selling their labor to an employer like Mississippi College to pay for private school).
  3. For whom will it be produced? (e.g., deciding which children receive specific types of education).

Questions & Discussion

• How many of you guys have ever had an economics class before?

  • Responses indicated some had high school economics and others had college-level economics.

• What did you guys learn? What kind of content?

  • Responses included supply and demand and how money moves throughout life.

• Discussion on Business Statistics and New Testament classes:

  • Student A: Taking Business Statistics $305$.
  • Student B: Took statistics last semester.
  • Student A: Has a next class at $12:30$.
  • Student B: Has a class at $11:00$.
  • Student C: Has a New Testament class at $5:00$.
  • Inquiry about living in Ratliff and swapping Snapchat information for coordination.