To begin... Make a list with two columns, ‘wants’ and ‘needs’. 19/09/2018 To begin... Make a list with two columns, ‘wants’ and ‘needs’. In each column, try and think of ten things that you, right now in your life, want or need, and write a price (estimate) for these. Total the price of this list at the bottom. Then below this total, write down your monthly income... Theme 1 – Microeconomics -1.1.3 The economic problem

Homework – Net migration Qs 19/09/2018 Homework – Net migration Qs Due Tuesday 15th September - Period 2 Ensure your name is on it and I will collect it now Theme 1 – Microeconomics -1.1.3 The economic problem

Year 12 AS Economics Ms Haron

Start of lesson drills Planner on the desk Pen/stationary available 19/09/2018 Start of lesson drills Planner on the desk Pen/stationary available Folder/Exercise book on the desk Date and title copied 1.1.3 The economic problem Ready to learn Reminder of expectations every lesson Theme 1 – Microeconomics -1.1.3 The economic problem

Theme 1 1.1 – The nature of Economics 1.1.3 The economic problem a) The problem of scarcity – where there are unlimited wants and finite resources b) The distinction between renewable and non-renewable resources c) The importance of opportunity costs to economic agents (consumers, producers and government)

Last lesson we covered: 19/09/2018 Last lesson we covered: Thinking like an economist: the process of developing models in economics, including the need to make assumptions The use of the ceteris paribus assumption in building models The inability in economics to make scientific experiments The difference between Positive and Normative economics Theme 1 – Microeconomics -1.1.3 The economic problem

Today Scarcity The Economic Problem Opportunity cost 19/09/2018 Today Scarcity The Economic Problem Opportunity cost Renewable and Non-Renewable Resources Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Why do we do Economics? The word economics comes broadly from the Greek meaning ‘management of the household’. What we take this to mean today is the management of resources, and the ‘household’ is the perspective we take, be it a single firm, a nation or the global economy The reason we need to consider the management of these resources is the result of the economic problem. Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 The Economic Problem This is the central issue of economics. Put simply, it states that we, as human beings, have an unlimited number of things that we want or need. Unfortunately, we live in a world that has limited resources. As a result, we are in a potentially difficult situation where we want more than we can have. Economics is the result, and studies how this problem can best be managed (NOT resolved) Theme 1 – Microeconomics -1.1.3 The economic problem

Unlimited Wants and Needs 19/09/2018 Unlimited Wants and Needs Go back to the list you made at the start of this lesson. Is it exhaustive? If I offered you £20, with no catch, would you take it? And if I offered you another.... Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Scarcity Now look at the difference between the two figures, you all probably have a bigger wishlist than the money you get can afford. This is true not just for individuals, but for firms (companies), countries, and the world as a whole. The important term we use to describe this lack of resources is ‘scarcity’. https://www.youtube.com/watch?v=qZbvMtIy_kE Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Scarcity Scarcity – a situation that arises when people have unlimited wants in the face of limited resources More prevalent in LEDCs but is also true of more prosperous countries like the UK Do not confuse it with poverty. Poverty is where individuals lack the necessities of life but relatively rich people face scarcity as resources are limited Theme 1 – Microeconomics -1.1.3 The economic problem

Scarcity and choice Scarcity forces people to make choices 19/09/2018 Scarcity and choice Scarcity forces people to make choices Each individual much choose which goods and services to consume. To do this they would prioritise the options into things they need and things they want On a national level, governments have to make choices between alternative uses of resources Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Scarcity and choice It is this need to choose that underlies the subject matter of economics. Economics analysis is all about analysing those choices made by individual people, firms and governments. For example, over six million people travel into London each day and they make decisions about when to travel, whether to use the bus, the tube, to walk or cycle or work from home. Millions of decisions are taken, many of them are habitual – but somehow on most days, people get to work on time and they get home too in safety if not in comfort! Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Opportunity cost When you choose to consume a good, you do so at the cost of the next best alternative in your list of priorities Opportunity cost is the cost of the next best alternative forgone E.g. Cinema: Ice cream/popcorn Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Opportunity cost Andrew has just started his AS and has chosen to take economics, mathematics, geography and French. Although he was certain about the first three, it was a close call between French and English. What is Andrew’s opportunity cost of choosing French? Theme 1 – Microeconomics -1.1.3 The economic problem

Opportunity cost NHS activity Remember this: 19/09/2018 Opportunity cost NHS activity Remember this: You have a fixed budget of £200,000 Consider how that budget might be allocated to treatments Justify your rationale Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Theme 1 – Microeconomics -1.1.3 The economic problem

Examples of base cost for a range of treatments 19/09/2018 Examples of base cost for a range of treatments Base cost – this is usually excluding the costs of pre-treatment, GP appointments, post-procedure care and follow-up care. Costs are higher for patients who need an extended stay in hospital Base costs for 2014-15 (costs have been rounded up for ease of use) Planned caesarean-section in NHS hospital £2,400 Natural birth in NHS hospital £1,800 Abdominal hernia repairs £2,300 Hip replacement £8,900 Liver transplant £70,000 Gastric (stomach) by-pass £5,000 One round of IVF treatment £6,000 Bone marrow transplant £70,000 Heart transplant £43,000 Cochlear Implant £17,000 Kidney transplant from heart-beating donor £15,000 Kidney transplant from non-heart-beating donor £13,600 Plasma exchanges (20 or more) £9,700 Theme 1 – Microeconomics -1.1.3 The economic problem

Renewable and Non-Renewable 19/09/2018 Renewable and Non-Renewable However, all is not doom and gloom! Some resources are ‘infinite’, in that given time, they can be renewed. More on that in the next lesson Theme 1 – Microeconomics -1.1.3 The economic problem

Today we have covered 1.1.3 The economic problem 19/09/2018 Today we have covered 1.1.3 The economic problem a) The problem of scarcity – where there are unlimited wants and finite resources c) An introduction to the importance of opportunity costs to economic agents (consumers, producers and government) Theme 1 – Microeconomics -1.1.3 The economic problem

Plenary - Scarcity What does the existence of scarcity mean? 19/09/2018 Plenary - Scarcity Resources Wants Scarcity Choice What to produce? How to produce? For whom to produce? What does the existence of scarcity mean? Economies are inefficient Economies are developing Households, firms and governments have to make choices It is not possible to increase the quantity of resources Theme 1 – Microeconomics -1.1.3 The economic problem

Plenary – Opportunity cost 9/19/2018 Plenary – Opportunity cost The best alternative forgone. A young woman decides to go to university to study full time. What is the opportunity cost of this decision? The income she could have earned in a job The income she earns when she leaves university The qualification she gains at university The tuition fee she has to pay

Homework – No HW today! No formal homework. 19/09/2018 Homework – No HW today! No formal homework. To “be more” – research/read about renewable resources in Economics Theme 1 – Microeconomics -1.1.3 The economic problem

19/09/2018 Expectations Theme 1 – Microeconomics -1.1.3 The economic problem