Economics

What is Economics?? Economics is the study of how and why people make decisions and the flow on effects of these decisions As an economics student you will explore issues that impact directly on your life, personal choices, choices made by your community and choices made by the government Scarcity is a fundamental concept in the study of Economics

WALT – Understand that due to Scarcity we must make choices

Scarcity We all have a limited amount of means But we all have a unlimited amount of needs and wants This results in Scarcity. Scarcity will then result in us having to make choices because we cannot have everything we want.

Definition – to copy into vocab list Means- Our Personal resources (time, skills, money and family) Wants – Things we desire but are not necessary for survival e.g. Sports car Needs – Things that we must have in order to survive ( food, clothing, water and shelter) Scarcity- when peoples needs and wants are greater than their means.

Work booklets Read page 6 Complete questions 1- 3

WALT: Understand that with every choice we make there is always an opportunity cost

Opportunity Cost Each time we make a choice we miss out on the next best option. There is always a next best option that we do not choose This is what we call an opportunity cost. All decisions have an opportunity cost.

Example You have $20 to spend There are 4 different things you want to do with your $20 on A night at the movies Top up your pre paid cell phone Savings Download an album Your means ($20 in this case) are limited. You are unable to buy everything you want so you have to make a choice. You rank your options as follows 1. Cell phone top up 2. Night at the movies 3. Savings 4. Movie Download In this case your choice is to top up your cell phone. The opportunity cost is the night at the movies. The opportunity cost is not all of the other choices you did not choose, it is the second best choice that you gave up.

Vocab – Copy into Vocab List Opportunity Cost: The next best alternative forgone. ( The second best choice not chosen)

Practice Examination Question Define this word first Scarcity is when peoples needs and wants are greater than their means. Time is a limited resource for Rina as she only has 24 hours in a day to do all the activities she wishes to spend her time on. Because Rina cannot do all that she wants in a day, she must choose which activities are most important to her so that she gets to do them within the limited time that she has. Opportunity Cost is the next best alternative forgone. If Rina chooses to work at the local café then she will have to give up her other activities. If her second option is to spend time with her family, this would be her opportunity cost. Explain your answer in relation to the question Define this word Explain your answer in relation to the question

Your Turn Means are our personal resources. Alexi has limited means as he only saves $50 per week. Alexi would like to go on all three overseas destinations but he does not have enough money to go to all three places, Alexi may also not have enough time to get to all three destinations, because he only gets two weeks holiday. Therefore Alexi must make a choice to where he would prefer to go. Opportunity cost is the next best alternative forgone. Alexi’s first preference is to go to Samoa and his second preference is China. The opportunity cost of his decision to go to Samoa is that he will miss out on travelling to China.