Have you ever thought that a pizza is the result of economic decisions?

Meet Marco Hey class!

Marco made a choice to open a pizza business.

He has decided to use his money, his business skills and his momma’s secret recipe to produce a popular food

What other choices will Marco make daily to produce his pizza and run his restaurant?

What ingredients should be used? how many pizzas to make in a day? How much should he charge? how many people should he hire to make the pizzas and serve them to customers? Will more pizzas sell if we deliver?

This is an economy!! Marco PRODUCES pizza, DISTRIBUTES his pizza at the restaurant and through a delivery service and his customers pay $ to CONSUME (eat) a good they want

The economy of a country like the United States works the same way, just on a larger scale

Private citizens and the government own resources and choose how they are used to meet people’s wants and needs

Economics is based on The fact that people are forced to make choices about how to meet their unlimited wants and needs

The problem is resources are limited. All economic decisions are based on how to use limited available resources. This is known as SCARCITY

Scarcity Causes producers and consumers to make choices Make this or that… Buy 5 of these or 1 of those…

Economic choices involve costs When an economic choice is made, other options are not picked. These are the costs If you choose to buy shoes instead of a T-shirt what are the costs??

Opportunity Cost The next best option that was not picked is the opportunity cost

Opportunity Cost Example You’re hungry and can decide to eat tacos, pizza, or salad. You do not like lettuce so salad is out You really like tacos, but had Mexican yesterday You choose Pizza What is the opportunity Cost???

Incentives Because choices involve costs, People look for the “benefits” of making a choice

Incentives Incentives benefits that motivate a choice are known as Incentives

Incentives This is cheaper than that I could make more Profit Buy 1 get 1 free!!!

To deal with the issue of scarcity, people in any economy face four basic economic decisions.

Obj. 7.1 The 4 Basic Economic Questions

All economies must answer 4 basic questions

1.What to Produce? (production)

2. How to Produce?

3. How many to produce? (consumption)

4. For Whom? (distribution)

1.What is Produced? (production)

In any economy people have to decide what to produce with the scarce resources they have.

This decision depends on: needs and wants of the people

2. How are goods Produced?

This decision depends on: the amount of resources available

Resources Any item used to produce, distribute or consume goods and services

3. How many to produce? (consumption)

How much to produce is determined by supply and demand.

Supply 1.Based on resources available and want/need 2.How much should be produced?

Demand The How much do people want your good or service

4. For Whom? (distribution)

People must find a way to decide how the goods or service will be given out

Is the good/service Is the good/service -exchanged for money? -Traded for another g/s? -sold direct to customer? -Delivered? air, sea, land?

The answers to these 4 questions make the foundation of every economy

What? (production)

How?

How many? (consumption)

For Whom? (distribution)

How countries make those choices is determined by the type of economic system in the country. Communist Capitalist Free-market Traditional Tribal Barter Money-Based Barter Money-Based

When answering these 4 economic questions, people must consider what RESOURCES are available and what resources are scarce Objective 7.3 Identify the factors of production

It is the availability of resources that drives all economic choices

any good or service needed to produce other goods or services Factors of Production In economics, resources are called Factors of Production A Resource is…

factors of production= The resources used in production There are 3 types of factors of production Natural - Human - Capital

factors of production= Resources!!

NATURAL RESOURCES Materials from the earth used for production Mostly non-renewable

What examples of Natural resources can you think of?? Lumber (wood) *Cotton Metals *Leather Oil *seeds Land Animal fur

Human resources (workers ) The people involved in the process of production

Human resources (workers) 3 types Entrepreneur- The person that starts a business to produce a G/S Management: leads production process & assigns tasks to workers Labor (Workers) – Uses their skills to produce

CAPITAL RESOURCES Other essential resources needed for the production process There are 2 types of capital

CAPITAL RESOURCES There are 2 types of capital FINANCIAL CAPITAL: $$MONEY$$ needed for production CAPITAL GOODS: Machines, Tools, Buildings, factories, land (all necessary for production)

EXIT TICKET – 25 POINTS On your own: Complete “Economics Concepts 7A TURN IN TO ME BY THE END OF CLASS HOMEWORK – CUT OUT FLASHCARDS (10 POINTS)