8/15/2014

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Friday! . . . Basics Continued
Econ,
Econ
Econ
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Economic
Terminology
Utility =
Marginal =
Satisfaction!
Additional!
Allocate = Distribute!
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8/15/2014
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Scarcity vs. Shortages
Shortages occur when producers will not or cannot
offer goods or services at current prices. Shortages
are temporary.
Scarcity occurs at all times for all goods.
Price vs. Cost
Whats the price? vs. How much does that cost?
Price= Amount buyer (or consumer) pays
Cost= Amount seller pays to produce a good
Investment
Investment= the money spent by BUSINESSES to improve
their production
Ex: $1,000 new computer, $1 Million new factory
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Services= actions or activities that one person
performs for another (teaching, cleaning,
cooking)
Goods= physical objects that satisfy needs and wants
Give examples
Consumer Goods- created for direct
consumption (example: pizza)
Capital Goods- created for indirect
consumption (oven, blenders, knives, etc.)
Goods used to make consumer goods
Goods vs. Services
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8/15/2014
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Accountants vs. Economists
Accountants look at only EXPLICIT COSTS.
Explicit costs are the traditional out-of pocket
costs of decision making.
Ex: Going to Disneyland
Economists look at the EXPLICIT COSTS and
the IMPLICIT COSTS.
Implicit costs are the opportunity costs such as
forgone time and forgone income.
Ex: What if Matt Ryan leaves the NFL to
open a Chick fil-A franchise?
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The 4 Factors of
Production
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8/15/2014
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The Four Factors of Production
Entrepreneurship
Capital
Labor
Land
Producing goods and services requires the use of
resources- DUH!.
ALL resources can be classified as one of the
following four factors of production:
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Land = All natural resources that are used to produce
goods and services. Anything that comes from mother
nature. (Water, Sun, Plants, Oil, Trees, Stone, Animals,
etc.)
The Four Factors of Production
Labor = Any effort a person devotes to a task for which
that person is paid. (manual laborers, lawyers, doctors,
teachers, waiters, etc.)
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Two Types of Capital:
1. Physical Capital- Any human-made
resource that is used to create other goods
and services (tools, tractors, machinery,
buildings, factories, etc.)
2. Human Capital- Any skills or knowledge
gained by a worker through education and
experience (college degrees, vocational
training, etc.)
The Four Factors of Production
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Entrepreneurship= ambitious leaders that combine the
other factors of production to create goods and services.
Examples-Henry Ford, Bill Gates, Steve Jobs, Inventors,
Store Owners, etc.
The Four Factors of Production
Entrepreneurs:
1. Take The Initiative
2. Innovate
3. Act as the Risk Bearers
So they can obtain _________.
Profit= Revenue - Costs
PROFIT
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8/15/2014
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The Factors of Production
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The Four Factors of Production
You decide to order a pizza to satisfy your wants. First,
you picked up the telephone and gave your order to the
owner, who entered it into her computer. This information
came up on the chief bakers monitor in the kitchen and he
assigned it to one of his cooks. The cook was busy mixing
dough out of salt, flour, eggs, and milk.
The cook finished mixing dough, washed his hands in
the sink, and prepared your pizza using tomato sauce, cheese,
and sausage. He then placed the pizza in the oven. Within 10
minutes the pizza was cooked and placed in a cardboard box.
The delivery person then grabbed your pizza, jumped in the
company car, and delivered it to your door.
Classify the Factors of Production in the following scenario:
8/15/2014
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The Four Factors of Production
LAND LABOR CAPITAL ENTREPRENEURSHIP
You decide to order a pizza to satisfy your wants. First,
you picked up the telephone and gave your order to the
owner, who entered it into her computer. This information
came up on the chief bakers monitor in the kitchen and he
assigned it to one of his cooks. The cook was busy mixing
dough out of salt, flour, eggs, and milk.
The cook finished mixing dough, washed his hands in
the sink, and prepared your pizza using tomato sauce,
cheese, and sausage. He then placed the pizza in the oven.
Within 10 minutes the pizza was cooked and placed in a
cardboard box. The delivery person then grabbed your pizza,
jumped in the company car, and delivered it to your door.
WEVE BEEN
CLIMBING
SLOWLY . . .
NEXT WEEK
WE SPEED
UP!
KEEP UP AND
HOLD ON!