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01.00 Welcome to Economics

Terms in this set (5)

It is currency, a type of money. Do you see someone using a debit card? That is money, too. Money is anything of value used in exchange for goods and services. Currency is the bills and coins you might have if you are lucky. Currency is a scarce resource.

Scarce means limited in quantity. Because of scarcity, we have to make choices. You can only choose to buy items up to the extra fifty dollars I gave you. Since you have to make a choice, you should examine the costs and benefits. Look around you and choose one way to use those fifty dollars. What would be a cost of that choice? If you are listening in the car, perhaps you pass a movie theater. What would be the negative of spending it all there? Perhaps you could not then go bowling, or you would not have a gift for your friend's birthday.

Benefits would be the pros of the decision, like seeing a new popular movie and even taking your friend to the movie as the birthday present. Look for the option where the benefits outweigh the costs.

The opportunity cost is the alternative experience you gave up. By choosing the movie, you didn't go bowling. All around you, people make choices every day. Do you see someone walking into Wendy's™? Perhaps they would have gone to McDonald's™ instead if it were closer.

This brings us to supply and demand. How many fast food restaurants are in your town? How many would you guess are in the closest larger city? With more people in the big city, people demand more fast food. Therefore, people build more fast-food restaurants to meet the higher demand. These are the suppliers. The interaction of supply and demand will determine prices.