WELCOME C&E STUDENTS  Grab today’s handouts.  Roll Call Question: “Would you rather eat 100 ants or 20 beetles?”  Is your notebook organized?

Warm Up 1. What is the difference b/w something you want & something you need? 2. What is expensive in our society? Why do you think this is?

Unit 5 Personal Financial Literacy Objective 5.1: To Identify the basic principles of economics: needs, wants, scarcity, trade off, and opportunity cost.

Desert Island  Imagine you are moving to a desert island with no kind of infrastructure.  Write down what you will..  Want  Need

I. What is economics A. Needs and Wants 1. Need- something necessary for survival 2. Want- desire not necessary for survival B. Economics- the study of how people seek to satisfy needs and wants with limited resources  Macroeconomics= study of economy as a whole and decision making by large units, such as governments or whole industries or societies  Microeconomics= study of behavior and decision making of small units, such as individuals and businesses

II. Scarcity A. Scarcity- 1. limited quantity of a resource to meet unlimited wants 2. This is the driving force of economics 3. A shortage occurs when producers will not or cannot offer goods or services at the current prices 4. A shortage and scarcity are not the same thing. B. Goods and Services 1. Goods- physical objects 2. Services- actions or activities that one person performs for another

III. Trade-offs A. A resource can only be used once. It cannot be used to produce something else B. Trade-off- the process of giving up one desire in order to satisfy another desire 1. Ex: $100 vs. give girlfriend a present 2. Ex: 2 more hours of sleep vs. studying for test

IV. Opportunity Costs A. Opportunity cost- value of what is given up in a trade-off (the next best option) 1. Ex: Buying the Assassin’s creed game 1. Cost not having the $60 to spend on something else 2. Ex: College 1. cost is $ of college and amount of $ gained from working instead 2. Remember: “ An opportunity cost is an opportunity lost.” B. Immediate gratification- when you give up something in the long-term to satisfy an immediate want

What would be the opportunity cost of:  Buying a new iPhone at $299?  Staying home to study on Sunday afternoon?  Having a child while in high school?

Why are all goods and services scarce? 1. Some goods cost more than others 2. All resources are scarce 3. Some things are needs and others are wants 4. Some people want to have more goods than others

Of the following scenarios, which is an example of immediate gratification? 1. An individual spends $ on a pair of shoes instead of putting that money into a savings account 2. An individual puts money into a savings account to use to buy a car when he turns An individual pays for a gym membership instead of going to the movies 4. An individual signs up for a credit card to begin building credit

Ntbk? Is your note book organized?  All units organized with labeled dividers  All notes are in the proper order & unit section  All handouts are organized in their assigned unit

Objective 5.1: Describe the basic factors of production such as land, capital, labor and entrepreneurial skills and their impact on economic activities  What is the difference between a need and a want?  What would be the opportunity cost of buying a $ iPhone?

“What Went Into This Candy Bar? ”  List everything that went into making this candy bar from the time someone had the idea for the candy until the consumer purchased the candy in the store

I. Factors of Production Resources used to make all goods and services A. Land- includes all natural resources B. Labor- is the effort that a person devotes to a task for which they are paid 1. White collar workers- high skilled office work 2. Blue collar workers- low skill manual labor

C. Capital- any human-made resource used to produce goods or services 1. Physical capital- goods that include buildings and tools: Hammers, Pizza oven, Factory, computers. 2. Human capital- knowledge and skills a worker gains through education and experience: Manager, Corporate Accountant, Pizza Chef, Professor etc..

D: Entrepreneurs- risk-takers who decide how to combine other factors of production to create new goods and services.

Get out your whiteboards!  Take out your white boards  You will be looking at different elements that fall under one of the four factors of production.  Your job is to correctly identify whether the element is: LAND, LABOR, CAPITAL or ENTREPRENEURSHIP

Name that Factor of Production 1. Bill Gates 2. Oil 3. Flight school training 4. Hammer 5. Cashier at McDonalds 6. A forest years experience teaching 8. Paper factory 9. $ A 10-year old at a lemonade stand 11. Washing Machine 12. Executive Office Assistant

Answers 1. Bill Gates - E 2. Oil - Land 3. Going to school - HC 4. Hammer - PC 5. The cashier at McDonalds – Labor 6. A forest- Land 7. years experience teaching – HC 8. Paper factory – PC 9. Tricked you- financial capital ( we’ll do that one in Unit 7) A 10-year old at a lemonade stand – E 11. Washing machine - PC 12. Executive Office Asst.- HC

 Welcome to Little Italy Pizzeria. We are small business owners and currently operate two pizza restaurants. Our pizzerias are located at Stonecrest and the Arboretum. Who wants to volunteer to be a Store Manager?  What are examples of the four factors of production you would see inside our pizza parlor?

LETS LOOK AT OUR CANDY BAR LandLabor CapitolEntrepreneurship

Choices All Societies Face Unlimited wants Limited Resources Scarcity Choices All Societies Face What to produce How to Produce For Whom To Produce

In summary: Scarcity forces suppliers and consumers to choose among alternatives and to arrive at affordable decisions

II: Economic Systems  The United States operates under a Free Enterprise Capitalism system.  Under this system businesses compete for profit with a minimum of government interference.  Question: How does a citizen’s level of education and training affect a country’s resources?

Price is determined by the consumer. “the customer is always right.” Consumer Sovereignty

 I: Consumer Sovereignty  Consumption: the act of consuming or the use of economic goods.  Consumers: the people who buy and use goods and services.  Consumer sovereignty: the power of consumers to decide what gets produced.  Producers have to meet the demands of the consumers or….go out of business

Complete the handout  Take your notes and record the definition and give examples of the 4 factors of production

Factors of Production Activity  Label OR cut out and organize each box into the correct factor of production:  Land  Labor  Capital  Entrepreneur  Then organize the factors needed for each business  Bank  Private School  Textile Factory  Restaurant  Get construction paper and affix OR write down your answers for each business

II. Revenue & Costs A. Revenue –income a company receives B. Cost –value of money that has been used up to produce a good C. Marginal –value of one more item

D. Cost-benefit analysis: Economic decision making  Choosing an action when benefits are greater than costs  However, at some point cost may exceed benefit E. Marginal utility: the first unit of a consumed good is more useful than the next unit consumed Ex: A Starbucks Grande peppermint $3.89

Any resources that are made by humans and used to create other goods and services are called: 1. entrepreneur 2. labor 3. capital 4. land

III. Revenue  Total Revenue: number of units sold multiplied by the average price per unit  100 pizzas x $10.00 = $  Marginal Revenue: Total change in revenue that results from selling one more unit of output  100 pizzas x $10.00 = $  One more pizza sold = $10.00  $ $10.00 = $  Marginal revenue= $10.00

IV. Marginal Cost  To predict the revenue that will come from the goods you produce, you must balance costs & benefits  After figuring out production, you must figure out marginal cost- the price of producing one additional unit 1. Ex: it takes $20 to produce 10 toy cars What is the marginal cost of producing one more car? $20/10 cars= $2 per car

Which of following terms refers to the extra or additional cost of producing one additional unit of output? 1. Total cost 2. Variable cost 3. Fixed cost 4. Marginal cost

The income from a full time job that you give up when you go to college is called: 1. Trade-off 2. Opportunity cost 3. Marginal cost 4. revenue

V. Marginal Benefits A. Benefits of each item produced usually goes down with each item produced B. Marginal benefit- additional benefit of each additional unit produced Ex: The first 10 toy cars sell for $30 the next 10 toy cars sell for an additional $15 20 toy cars sell for $45 After the first 10 toy cars, what is the marginal benefit of each toy car produced? First 10- $30/10= $3 Next 10- $15/10 =$1.50

Ex: A developer wants to build houses on 100 acres of land near a lake * Houses w/ a lake view cost the most *Value of the land decreases further away from the lake *Declining marginal benefit with each house built beyond a certain point

VI.Types of Costs  fixed cost –expenses that are the same no matter how many units of a good are produced  Mortgage payment/rent  variable cost –costs that change with the number of items produced & increase as production grows  Wages  Raw materials  Total costs –fixed costs + variable costs

The amount of money a business owner pays for rent or property taxes that does not change is called? 1. Total cost 2. Variable cost 3. Fixed cost 4. Marginal cost

Marginal benefit vs. Marginal cost

Warm Up  Give an example of a fixed cost.  Give an example of a variable cost.

Unit 5.3 Objective: To identify the costs of production and consumption of goods & services

I. Labor and Consumers A. Division of Labor- assigning small number of tasks to each worker to increase efficiency B. Specialization- workers focus on one activity only, allows them to work faster C. Consumption- consuming or use of economic goods

Why is division of labor profitable? 1. It increases efficiency 2. It increases spending on capital goods 3. It reduces labor unrest 4. It protects workers from losing their jobs

D. Consumer sovereignty 1. power of consumers to decide what gets produced 2. producers meet demands or go out of business

How do consumers affect the products a business produces? 1. By writing letters to the manufacturer 2. By buying or not buying the product 3. By buying goods that are complementary to the product 4. Consumers have no impact on what products are produced

II. Labor and Output A. Marginal Product of Labor- change in output from hiring one additional worker B. Increasing Marginal Returns- increase return for workers 1. If there are three tasks in creating a product, MPL increases for each worker hired 2. Specialization increases per worker hired

C. Diminishing Marginal Returns- decrease in return, if too many workers are added 1. after first three workers (one for each task), benefits of specialization end 2. adding more workers increases total output, but at a diminishing rate 3. MPL decreases as number of workers increases

D. Law of diminishing returns: adding one more factor of production, while holding others constant, will yield lower per-unit returns Ex: At some point each additional worker will add less output than the worker added before

Number of workers Output (pizzas per hour) Marginal Product of Labor

Pizzeria Craziness Breakdown Pounds Pounds Market Item Supplied Demanded Status olives Shortage flour Shortage tomatoes Shortage onions Shortage cheese Even sausage Even ham Even pepperoni Even garlic Surplus peppers Surplus mushrooms Surplus anchovies Surplus