Chapter 1SectionMain Menu What Is Economics? –Economics is the study of how people make choices to satisfy their wants –What type of decisions do you have to make in your life? –What type of decisions do businesses have to make? –What type of decisions does our government have to make?

Chapter 1SectionMain Menu Needs & Want Economics begins with the idea that people cannot have everything they need and want A need is something like air, food, or shelter that is necessary for survival. A want is an item that we desire but that is not essential to survival. Because people cannot have everything they need and want they must consider their options and decide which choice best fills their needs What decisions do you need to make on a daily basis? –List them in 2 sections Needs & Wants

Chapter 1SectionMain Menu Decisions If you have to decide what to do with your time what would you do, go to a movie or study for an upcoming test? –Trade off and options Fun, costs money, do poorly on test Do better on test, not as fun, free Businesses have to decide how many people to employ and how much to produce Government must decide to use their budget to build a school or a park

Chapter 1SectionMain Menu Scarcity Scarcity is the fundamental economic problem Not enough resources for everybody In order for something to be scarce, it must meet two criteria: Limited and Desirable These resources are called: Goods are physical objects Services are actions or activities that one person performs for another

Chapter 1SectionMain Menu Scarcity is not the same as shortage. A shortage occurs when producers will not or cannot offer goods or at the current prices Shortage can be temporary or long term Scarcity always exists because our needs and wants are always greater than our resource supply Goods and services are scarce because they are all made from resources that are scarce

Chapter 1SectionMain Menu The Factors of Production –Land All natural resources that are used to produce goods and services. –Labor Any effort a person devotes to a task for which that person is paid. –Capital Any human-made resource that is used to create other goods and services. 2 Types: Human & Physical

Chapter 1SectionMain Menu Land – Natural Resources

Chapter 1SectionMain Menu Human Capital

Chapter 1SectionMain Menu Physical Capital

Chapter 1SectionMain Menu Entrepreneurship

Chapter 1SectionMain Menu The Factors of Popcorn Production Land Popping Corn Coconut Oil Labor The human effort needed to pop the corn Capital Corn-Popping Device

Chapter 1SectionMain Menu How do we make decisions? 1. Identify the problem. This includes defining what we want, and identifying the alternatives that move us to trying to satisfy our wants. Ex. Should I sleep, study, or hang out with friends tonight?, Do I want to have a fit body or not? 2. Analyze each alternative. We evaluate each alternative (trade-off) by considering the pros and cons of each, or as the economist might say, "after considering the benefits and costs of each."

Chapter 1SectionMain Menu 3. Make a choice. In this last step we choose the preferred alternative, rejecting the others. Economists explain that the next best alternative, or most desirable alternative given up as the result of your decision as an opportunity cost.

Chapter 1SectionMain Menu Decision Making Grid Cost/Benefit Analysis – Healthy Lifestyle vs. Non- Healthy Alternative: Fit Body BenefitsCosts Alternative: Non-Fit Body BenefitsCosts

Chapter 1SectionMain Menu What to do on a Friday night?

Chapter 1SectionMain Menu Opportunity Cost The most desirable alternative given up as the result of a decision –EX: A family buys a computer, family members cannot use the same money to pay for their second choice, going on a trip. –The trip then is the opportunity cost of buying the computer.

Chapter 1SectionMain Menu

Chapter 1SectionMain Menu

Chapter 1SectionMain Menu Pick a Prom Date……. Using Cost/Benefit Analysis, you are going to choose a date for Prom. Here are your 4 options: 1.Charlie Sheen Justin Bieber 3.Robert Pattinson 4.The Situation

Chapter 1SectionMain Menu Decision Making Grid Sleep Late AlternativeWake Up Early Alternative Benefits Decision Opportunity CostWake Up Early to Study for Test Sleep Late Benefits forgone

Chapter 1SectionMain Menu Decision Making Grid Choices Sleep Late AlternativeWake Up Early Alternative BenefitsEnjoy more sleep Have more energy during the day Better grade on test Teacher & Parental approval Personal Satisfaction DecisionWake up early to study for test Sleep Late Opportunity CostExtra Study TimeExtra Sleep Time Benefits forgoneBetter grade on test Teacher & Parental approval Personal Satisfaction Enjoy more sleep Have more energy during the day

Chapter 1SectionMain Menu Making a Decision at the Margin OptionsBenefitOpportunity Cost 1 st hour of extra study time Grade of C on testOne hour of sleep 2 nd hour of extra study time Grade of B on test2 hours of sleep 3 rd hour of extra study time Grade of B+ on test3 hours of sleep

Chapter 1SectionMain Menu Production Possibilities Graphs What is a production possibilities graph? How do production possibilities graphs show efficiency, growth, and cost? Why are production possibilities frontiers curved lines?

Chapter 1SectionMain Menu CoconutsFish Production Possibilities Graph Coconuts 0 a (0,15) b (8,14) A production possibilities frontier c (14,12) d (18,9) e (20,5) f (21,0) Production Possibilities –A production possibilities graph shows alternative ways that an economy can use its resources (land, labor, capital). –The production possibilities frontier is the line that shows the maximum possible output (maximum efficiency) for that economy. Robinson Crusoe’s Production Possibilities

Chapter 1SectionMain Menu Fish Coconuts Production Possibilities Graph g (5,8) A point of underutilization c (14,12) d (18,9) e (20,5) f (21,0) a (0,15) b (8,14) S Efficiency –Efficiency means using resources in such a way as to maximize the production of goods and services.

Chapter 1SectionMain Menu Efficiency Means using resources in such a way as to maximize the production or output of goods and services Underutilization: any point inside the line indicates an underutilization of resources Cost: an alternative we give up when we choose one option over the other Law of increasing costs: increasingly expensive trade- offs. This law states that as production switches from one item to another, more or more resources are necessary to increase production of the second item

Chapter 1SectionMain Menu Fish Coconuts Production Possibilities Graph T Future production Possibilities frontier c (14,12) d (18,9) e (20,5) f (21,0) a (0,15) b (8,14) S Growth –Growth If more resources become available, or if technology improves, an economy can increase its level of output and grow.

Chapter 1SectionMain Menu CoconutsFish Production Possibilities Graph Coconuts c (14,12) d (18,9) Cost –Cost A production possibilities graph shows the cost of producing more of one item.

Chapter 1SectionMain Menu 1. A production possibilities frontier shows (a) farm goods and factory goods produced by an economy. (b) the maximum possible output of an economy. (c) the minimum possible output of an economy. (d) underutilization of resources. 2. An economy that is using its resources to produce the maximum number of goods and services is described as (a) efficient. (b) underutilized. (c) growing. (d) trading off. Want to connect to the PHSchool.com link for this section? Click Here!Click Here! Section 3 Assessment

Chapter 1SectionMain Menu 1. A production possibilities frontier shows (a) farm goods and factory goods produced by an economy. (b) the maximum possible output of an economy. (c) the minimum possible output of an economy. (d) underutilization of resources. 2. An economy that is using its resources to produce the maximum number of goods and services is described as (a) efficient. (b) underutilized. (c) growing. (d) trading off. Want to connect to the PHSchool.com link for this section? Click Here!Click Here! Section 3 Assessment