Chapter 1: An Economic Way Of Thinking

Economics
Chapter 1

I. An Economic way of Thinking

What's Economics?
- The study of choices people make to satisfy their needs and wants.
- It is the study of how society choose to use it's scarce resources to satisfy it's unlimited needs and wants.
Economists:
- Someone who studies the choices that people make.
- Someone who studies the economic theory and applies it to the real world.
Economic Actions:
1. Micro-economic: Study of one single factor of economy. (Mobile co.)
2. Macro Economic: Study of the entire economy.
Economic Decisions: (2 major economic makers)
1. Consumers (buy goods and services).
2. Producers (provide goods and services).
- The network of these decisions is the basis of all the economic theory.
Economic
Natural Resources: Farmlands, Oil Fields, Wind, Rain, and Sunlight.
2. Human Resources: Teacher, Dentist.
3. Capital Resources: Capital Goods, and Consumer Goods.
4. Technology: A Human Resource based on Natural or Capital resources (Computers).
5. Entrepreneurship: Michael Dell, And John Ford, Osman Trading co.
Capital resources:
Items used in the production of other goods and services. Example: Buildings, Machinery, Factories, and Dams.
Capital Good:
Items used in making finished products. (Pcs)
Technology:
Using Technical Knowledge and methods to create new products or improve the Existing ones. (PC advances)
Entrepreneurship:
The organizational abilities that are taking the risk of a new business.
Entrepreneur:
Someone who takes a risk in making a business or project that might fail.

II. Scarcity And Choice!!

Scarcity:
When Resources are Limited. People's needs and wants are unlimited. The Combination of limited economic resources and unwanted wants a result in a condition Known as Scarcity.
Identifying economic questions:
Limited economic resources require people to make decisions. People decide to allocate or distribute resources to satisfy the greatest needs
Barter: The exchange of one set of goods for Another.
2. Money: Is an item, typically currency, and that is commonly accepted in exchange of goods and services and in settings debts.
3. Credit: a form of exchange that allows consumers to use items with promise of repayment over a specified period of time.
- Plastic money: credit cards.
- Value: Goods and services are assigned a value that can be expressed by an amount of money or price.
- Factors: Availability – Utility (usefulness).
Interdependence:
- The relationship of mutual reliance and influence among people, businesses, regions, and nations.
- Exchange of goods and services between those who have and those who don't. The principle of independence depends on un-met needs & wants.
Self Efficiency:
The ability to fulfill all one's needs and wants without assistance.
- True self efficiency is rare due to limited resources. Producing everything needs tremendous raw materials, tools, extensive skills and knowledge in variety of fields.
- Instead of self sufficiency, people tend to specialize in certain areas of production and rely on other for additional goods and services.
Benefits of interdependence:
Development in one region of the world or section in the economy influence those in other regions or