Economic Decision Making

Economic Decision Making

• Section 1-1: Economic Decision Making

Economic Actors and Assumptions

• Types of Economic Actors: Economic actors include:

  • People

  • Consumers

  • Investors

  • Government (gov)

• Assumptions About Actors: Economists assume that economic actors are rational and self-interested.

Scarcity, Wants, and Shortages

• Central Problem: The central problem of economics is scarcity.

• Scarcity: Lacking resources while in demand.

• Wants: Something that is uncommon.

• Shortage: The temporary lack of resources.

• Response to Scarcity: Economic actors respond to scarcity by making economic decisions about how to use limited resources.

Production and Productivity

• Factors of Production: The term economists use to describe things that are required to produce goods/services.

• Productivity: Using inputs to make outputs.