Today we’ll begin covering the following topics: What is economics? Basic problems in economics Economic way of thinking Using productive resources

What are a few purchases you’ve made recently What are a few purchases you’ve made recently? Let’s say in the last month… List them out…Was it a want or a need? How long did you spend thinking about this purchase? What did you have to give up, besides the $ to make this purchase? You were most likely using economics thought for this purchase…making a rational decision based on your own self interest.

Time to think for a second… Think/Pair/Share How do you distinguish between a want and a need? What do you consider wants? What do you consider needs? (We’ll come back to this)

Chapter 1 What is Economics? Unit One Notes Chapter 1 What is Economics?

What is Economics? Your Textbook definition: Mr. Duryea’s definition Economics is the study of how individuals, families, businesses, and societies use limited resources to fulfill their unlimited wants Mr. Duryea’s definition Economics is how you decide what food to eat, what clothes to wear, and what movies to see. It is the study of the choices that people make to satisfy their needs and wants.

The Basic Problems in Economics Chapter 1-1 (pg 3-8) The things I need to live include… The things I want to have include… (List them out)

I. Wants Vs Needs A. People use “need” and “want” interchangeably. B. Wants are anything other than what is needed for basic survival. C. Needs are things required for basic survival (food, clothing, shelter). Easy example: Here's the rule of thumb for "want" and "need":  Anything that would not be useful in the aftermath of a disaster is a "want".  If the item would be sought out by the survivors, then it's a "need".  (Food, housing, medical care, electricity, transportation)

II. Choices A. Deciding how to spend a limited amount of money (allowance/paycheck) B. Each available choice competes with other available choices. Because your resources (money) are limited, you are forced to make an economic decision Vs. = =

II. Choices C. Businesses, like individuals, must make daily decisions as well. They are: 1. What to produce now 2. When to produce it 3. When to stop producing D. Societies face choices about how to utilize their resources in the production of goods and services

III. Problem of Scarcity What are some resources that are scarce? Why are these resources considered scarce? What exactly does Scarcity mean? Scarcity means that people do not have and cannot have enough income, time, and other resources to satisfy their every want

Remember this. Hint, hint, wink, wink… SCARCITY = THE MOST BASIC PROBLEM OF ECONOMICS!!!

The problem of scarcity A. All resources are limited. (money, time, trees, etc.) B. People compete for limited resources. C. Scarcity exists because people cannot satisfy their every want. D. Unlike scarcity, shortages are temporary. -this is the main difference between them

Video Clip Time First video clip… Rational Maximizing… It’s a little old, but interesting… think about the decision making you see in the clip How do we go about making decisions in our daily lives?

Factors of Production! Productive Resources Resources must be used to produce any and all goods and services – these resources are called the: Factors of Production!

IV. Factors of Production A. Land: natural resources and their location (land, water, fish, animals, forests, etc.)

IV. Factors of Production continued B. Labor – the work people do to produce goods and services

IV. Factors of Production continued C. Capital – manufactured goods used to make other goods and services (machines, tools, computers, etc.

IV. Factors of Production continued D. Entrepreneurship: the ability to start a new business or create new products Entrepreneurs are the people that are willing to take on the risks of starting a new business.

IV. Factors of Production continued E. Technology: the use of science to develop new products and production methods for increased efficiency Vs. Vs.

Trade-Offs Chapter 2 (26-33) Think/Pair/Share Questions: What recreational activity choices did you make this past weekend or week? What could you have been doing instead?

I. Trade-Offs and Opportunity Costs A. Trade-off: Is a resource is used to produce or consume one good, that same resource cannot be used to produce or consume something else. One good is sacrificed for another (Remember: Scarcity Forces Choices!)

Trade-Offs and Opportunity Costs B. When you decide to study economics for an hour, you are giving up any other activities that you could have done during that time. This ‘cost’ is called Opportunity Cost. Opportunity Cost = the value of the next best alternative that is given up to obtain the preferred items.

Put into easy terms. Where would you rather be right now? When you make a trade-off (and you always make trade-offs) you lose something. That something is your opportunity cost.

One more example Any time you pay money to purchase a good or service, you lose the opportunity to purchase your next best alternative.

Imagine the following scenario. Time Activity Price 6 PM 7 PM 8 PM 9 PM 10 PM

Trade Offs Scenario Parameters You have $40 to spend You have an Econ test on Monday This is the last football game of the season It’s your mother’s birthday Someone you like has asked you on a date Your favorite band is in town tonight.

Trade Offs Football Game: 3 hours, $5 Dinner: 2 hours, $20 Movie: 2 hours, $10 Rock Concert: 4 hours, $40 Study for test: variable time, $0 Hang out at friend’s house: variable, $0 Work at Job: variable time, earn $10/hr Family Time: variable time, $0

Responses What decisions did you have to make in this exercise? What constraints did you face when making these decisions? For each decision you made about how to spend your time, what did you have to give up?

II. Production Possibilities Curve A. The PPC shows the maximum combination of goods and services that can be produced from a given amount of resources. B. Using the production possibilities curve, a producer can decide how to use resources. Block 4 stopped here 9/11 got through the links and smiles and filled out their sheets

Here’s how the PPC works Imagine you own a fine jewelry business, you are the only employee and you work 40 hours a week. You have enough resources (metals, jewels, etc.) to make either 20 bracelets or 10 pairs of earrings… I’ll have to draw this so that it makes sense…

Another example… look at the opportunity costs!

II. Production Possibilities Curve C. Classic Example – military spending vs. domestic programs (“guns or butter” pg. 15)

Guns Vs. Butter Guns = military spending (tanks, aircraft, ammunition, basic training, recruiting, travel) Butter = domestic spending (education, emergency relief, unemployment, roads, etc.)

Production Possibilities Curve What is the best balance between military spending and domestic programs? What kind of situation might arise that would cause you to change your answer?