Glossary of terms and concepts- Click Here
Microeconomics studies the individual decision makers in the economy and the motives behind their economic actions and decisions. It studies how producers, or entrepreneurs, firms , and consumers, or households interact with one another in markets.
• firms produce and sell goods and services. Microeconomics studies how firms decide:
- What to produce
- What resources to use to produce it
- How much of it to produce.
• households consume (buy) goods and services from firms. Microeconomics studies how households allocate (budget) their limited incomes among the goods and services they will consume
• Firms can also be "consumers"when they consume raw materials and capital.
• Households also can act as "producers" when they provide labor to firms.
A page worth of Video that may help you understand scarcity and choice
Scarcity and Choice
Scarcity means that people want more than is
available. Scarcity limits us both as individuals and as a
society. As individuals, limited income (and time and
ability) keep us from doing and having all that we might
like. As a society, limited resources (such as manpower,
machinery, and natural resources) fix a maximum on the
amount of goods and services that can be produced. Problem: you have $3500 to move to a new city and start college. Each month you will have at your disposal another $1500 (a student loan, you don't need to use all of it) Using this web site what resources will you buy?
Scarcity requires choice. People must choose which of their desires they will satisfy and which they will leave unsatisfied. When we, either as individuals or as a society, choose more of something, scarcity forces us to take less of something else. Economics is sometimes called the study of scarcity because economic activity would not exist if scarcity did not force people to make choices.
When there is scarcity and choice, there are
costs. The cost of any choice is the option or
options that a person gives up. For example, if you gave up
the option of playing a computer game to read this text, the
cost of reading this text is the enjoyment you would have
received playing the game. Most of economics is based on the
simple idea that people make choices by comparing the
benefits of option A with the benefits of option
B (and all other options that are available) and
choosing the one with the highest benefit. Alternatively,
one can view the cost of choosing option A as the
sacrifice involved in rejecting option B, and then
say that one chooses option A when the benefits of
A outweigh the costs of choosing A (which are
the benefits one loses when one rejects option
B). Check out Opportunity Costs on Subpages below.
The widespread use of definitions emphasizing choice and scarcity shows that economists believe that these definitions focus on a central and basic part of the subject. This emphasis on choice represents a relatively recent insight into what economics is all about; the notion of choice is not stressed in older definitions of economics. Sometimes, this insight yields rather clever definitions, as in James Buchanan's observation that an economist is one who disagrees with the statement that whatever is worth doing is worth doing well. What Buchanan is noting is that time is scarce because it is limited and there are many things one can do with one's time. If one wants to do all things well, one must devote considerable time to each, and thus must sacrifice other things one could do. Sometimes, it is wise to choose to do some things poorly so that one has more time for other things.
One way to see the importance of scarcity is to examine how various people have constructed utopias.
Group of 3 to 4 earn five points a learn something
Assignment: Go to Youtube and enter a search "how its made" find a product that you have some knowledge about, get it approved by Mr. Baade to show in class. Keep length under 5 mins. With out viewing it able to identify the factor of production for 4 points. The rest of your class mates and Mr. Baade will be judges. A fifth point question will be what kind of industry is your product, Primary, Secondary or Tertiary and why?
Using examples with explanations from the video "Tucker", write a
paragraph for each of the following concepts of Economics, (a paragraph
has 5 to 7 sentences): Factors of Production, Scarcity, Trade offs and