Economic Way Of Thinking
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Economics
Chapter 1
An Economic way of Thinking
Whats Economics?
The study of choices people make to satisfy their needs and wants.
It is the study of how society choose to use its scarce resources to satisfy its 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:
Micro-economic: Study of one single factor of economy. (Mobile co.)
Macro Economic: Study of the entire economy.
Economic Decisions: (2 major economic makers)
Consumers (buy goods and services).
Producers (provide goods and services).
– The network of these decisions is the basis of all the economic theory.
Economic classify:
Goods (needs necessary for survival)
Wants (needs beyond what is necessary for survival).
Products:
– Goods (something physical).
– Services (activities).
Economic resources:
A resource: Anything that people use to obtain What they need or want.
Resources are used to produce goods and services, They are called factors of production.
Factors Of Production:
Natural Resources: Farmlands, Oil Fields, Wind, Rain, and Sunlight.
Human Resources: Teacher, Dentist.
Capital Resources: Capital Goods, and Consumer Goods.
Technology: A Human Resource based on Natural or Capital resources (Computers).
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.
Scarcity And Choice!!
Scarcity:
When Resources are Limited. Peoples 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 &wants.
Economic questions:
– What to Produce?
– How to Produce?
– For whom to produce?
Productivity:
Economists determine if resources are used wisely by studying productivity.
Economists:
Someone who studies the choices people make.
Production:
The Level of output for a given input (Such as 100 workers produce 1000 clocks)
Efficiency:
is the use of smallest amount of resources to produce the greatest amount of output.
How To Improve Efficiency?
Division of Labor: Each Labor is assigned a small number of tasks that it Repeatedly Performed.
Specialization: The Focus of a worker on only one or a few aspects of Production.
How To Increase Efficiency?
Creating Shortcuts for the workers to do the work Quickly.
Mechanization: Automation or Computerization.
Opportunity Costs
Trade – off:
The sacrifice of one good to purchase or produce another. The cost of this trade off is called the opportunity cost.
Opportunity Cost:
The value of the next best alternative that is given up to obtain the preferred item.
Example:
2 events you want to attend in the same week (a movie and a football match). Both cost the