Scarcity, Choices and Trade-offs Social Studies/ Economics Measurement Topic 1.1

Descriptive Overview: The central problem in the economics of any country is scarcity. When wants are greater than the resources to satisfy them, problems can arise ranging from trade-offs to rebellion.

Goal and Objective Students will be able to: identify conditions when prolonged scarcity becomes a long-term problem differentiate between choices are trade-offs that are acceptable and those that are not and why Analyze opportunity costs and how they affect the economic decision making process identify factors that lead to scarcity of resources

Terminology/ Vocabulary: Needs and wants scarcity choices trade-offs. Factors of production

What the heck is economics? The study of the way people make decisions to satisfy their needs and wants using their limited available resources. Why is this important???????? What resource does everyone have, just in different amounts?

You have a job after school, you need to study for three exams this week and a project. How do you budget time to account for all of this? You want to go out with friends, but you have a family get together to go to that you want to be at as well, what choice do you make? You are playing in the Super Bowl and your wife is about to give birth to your first child Sunday afternoon. What do you do? You want to be at both.

Why do we have to make choices? 2 factors cause us to make choices Factor #1: SCARCITY BABY!!!!!!!!!!! Always Present There is a limited supply of natural resources and we have unlimited wants Which means no one can get everything they have ever wanted Factor #2:Shortages Only from time to time When producers will not or cannot produce the goods people want at current prices

The Central Fact of Economics Is SCARCITY Resources are the things society uses to produce goods and services These resources are scarce (limited) The economic problem There are never enough resources to produce all of the goods and services that people want Therefore; nothing in life is free. Everything comes with a cost There is no such thing as a free lunch TINSTAAFL 2-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Scarcity and Choice Human wants are unlimited, but resources are not. Three basic questions must be answered in order to understand an economic system: What gets produced? How is it produced? Who gets what is produced?

Four Economic Resources (Factors of Production) Land Labor Capital Entrepreneurial ability 2-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Land Includes natural resources such as timber, oil, coal, iron ore, soil, water, as well as the ground in which these resources are found Is used for the extraction of minerals and farming Provides the site for factories, office buildings, shopping centers, homes, etc. Produces “rent” 2-6 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Labor The work and time for which one is paid is what economists call “labor” Money received for one’s labor is called wages and/or salaries About two-thirds of the total resource cost is the cost of labor 2-7 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Capital Man-made goods used to produce other goods or services is what economists call “capital” Examples are office buildings, stores, and factories The money owners of “capital” receive is called “interest” Capital is the MOST important of the four economic resources 2-8 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Entrepreneurial Ability The entrepreneur Sets up a business Assembles the needed resources Risks his/her own (or borrowed) money Makes a “profit” or incurs a “loss” Is central to the American economy 23 million businesses are virtually all entrepreneurs The vast majority work for themselves or have one or two employees 2-9 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Scarcity and Choice Every society has some system or mechanism that transforms that society’s scarce resources into useful goods and services.

How do people choose? Take into consideration several factors: Is the item a want or a need? What trade-off is involved? What is the opportunity cost involved?

Key Questions: How does scarcity affect our decision making? What role does scarcity play in economics? What are the factors of production? What are the country’s natural resources? What role do needs and wants play in the economic decision making process?