Topic 1: The central problem of econ

• The word economy describes the management of the resources of a country.
• Economy is a system in which producers produce the goods and services consumers demand.
• Economics is a social science that studies how people make use of scarce resources.
• There are two branches of economics; microeconomics and macroeconomics.
• Macroeconomics is concerned with issues of objectives and policies having to do with the overall/general economy, such as inflation, unemployment, growth and development and national income.
• Microeconomics studies individual units within an economy and how these units interrelate.
• Scarcity is the central problem of economics.
• Individuals have unlimited wants and needs, however the resources available to satisfy these wants and needs are limited.
• There are not enough resources available to produce all the goods needed to satisfy all our wants and needs.
• Scarcity forces individuals to make choices as every want and need cannot be satisfied so individuals must choose among alternatives.
• Scarcity is a condition in which individuals are forced to make choices among available alternatives because resources are limited compared to man’s unlimited wants and needs.
• In a scarce economy, individuals choose what to consume and society chooses what to produce.
• Society decides who gets what by producers attaching prices to goods and services, so who values it the most pays the most for it.
• Economic resources are those goods or services available to individuals and businesses for the production of consumer products.
• Opportunity cost is the opportunity lost; that is what we lose out on when we decide not to use a particular resource for a particular use.
• Opportunity cost is what could have been done with the resources when decisions are made about their use.
• The government of a country may face the alternative of applying its resources to the development of a stadium or devoting the same resources to the development of a hospital; if the stadium is selected, the opportunity cost is the hospital.
• A householder wants to buy a microwave oven and a toaster oven but has limited money; if he chooses to buy the microwave, the opportunity cost is the toaster oven.
• Research the production possibility frontier.
• Resources are scarce, so choices must be made as to how these resources are allocated because of society's competing needs and wants.
• Production, exchange/distribution, and consumption are the three main activities that must occur in order to satisfy man's unlimited wants with scarce resources.
• If Travis has $2000 and chooses to go to the movies ($1200) over going to a party ($2000), the next best alternative (opportunity cost) is the party since he chose to go to the movies.
• A firm has $20,000 and can purchase a new desk or paint for one of the office; it chose to purchase paint, so the opportunity cost is the new desk.
• Opportunity cost is defined as the value of the next best alternative foregone or sacrificed.
• Economic resources refer to factors of production (land, labour, capital and enterprise) which are limited in supply compared to man’s unlimited wants.