| Wants | | Resources |
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- People get pleasure or satisfaction from consuking goods
(things) or services (things done for them) and from the time
they spend in various activities.
- People seek to get as much pleasure or satisfaction out of life
as possible
- Does this mean people are selfish? Not necessarily. They may get satisfaction
from spending time or money helping others.
- What goods, services, or activities would you like? How many would the US as a whole want?
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| - Natural resources (or "land" for short)
- Labor -- human effort; people's time and energy
- Capital goods -- man-made things used in production
- Human capital -- Knowledge and skills acquired by education, training, and experience
- Entrepreneursip--effort and risk of initiating and coordinating production
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| Identify the resources | | Production Possibilities |
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- A forest
- Semi-trailer truck
- A paperback mystery
- A secretary
- The US capitol building
- Legal advice
- A dollar bill
- The Columbia River
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| - An economy's production possibilities are the possible combinations of goods and services that it could produce with a given technology
if all resources are fully and efficiently used.
- The resources available and technology are finite so only a finite quantity of goods can be produced.
- Because resources can be used to produce a variety of goods, many different finite combinations of goods and services are possible.
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| Scarcity and Cost | | Choice |
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- Finite resources cannot produce enough to satisfy all our essentially infinite wants. As a result, we say that resources are scarce.
- Scarcity is relative. It's not the absolute quantity of resources that's small but the quantity relative to what we need in order to do all we'd like to do.
Because of resource scarcity, doing one thing requires the sacrifice of some other alternative.
- This sacrificed alternative is the opportunity cost of the option chosen. Scarcity means there are no free lunches; there are always (opportunity) costs.
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- The inability of our resources to satisfy all wants forces us to choose.
- All societies, from the most primitive to the most advanced, regardless of the form of government, must make choices.
- Different societies will use different methods of choosing and will make different choices because their preferences or values are different.
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| Types of Choices | | Example: the Columbia River |
|---|
- What goods and services to produce?
- How to produce them? Which combination of resources to use?)
- Who will get what is produced?
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- Columbia River water is used for many purposes: irrigation of crops; transportation; recreation; production of electricity; drinking, washing, and other household uses; as a habitat
for salmon and other acquatic wildlife.
- The Corps of Engineers said, as long ago as 1976, that any increase in one usage of water would require "a corresponding
reduction by competing users." For example, increased use of water for irrigation would decrease the flow and reduce energy production.
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| Columbia River, continued | | ECONOMICS is the study of choices made by people facing scarcity |
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- The current debate over destruction of dams in the Columbia River basin is part of the debate over how to use this water resource.
- Destruction of the dams would increase the water available for fish habitat (and probably also increase recreational use) but would decrease the number of miles that were commercially navigable
(decrease the use of the river to transport grain).
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- Microeconomics studies individual choices of consumers and business firms and how they interact to determine which goods are produced and how they are produced and distributed.
- Macroeconomics studies the behavior of economic aggregates, such as the percentage of resources being utilized and the overall level of output.
- Which of your important issues are economic issues? Are they micro. or macro. issues?
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