Scarcity and the Science of Economics Chapter 1 : Lesson 1 Scarcity and the Science of Economics

Essential Question What basic choices are faced by all societies?

Imagine… A storm has damaged the main highway leading to your town, so there have been no deliveries of essential, or even nonessential, items to neighborhood stores. Some people are running out of certain things they need or want. Others have lost electric power, and some have no running water. On the next slide is a list of things you have that some of your neighbors are looking for. For each item, explain at least one way you think is best (and perhaps fairest) to distribute these items among your neighbors.

a. One loaf of bread b. One bicycle c. An assortment of handyman tools in one toolbox d. One bottle of aspirin e. One half-full bottle of antiseptic and 10 cotton balls f. Two one-gallon jugs of bottled water g. One cellular smart phone h. Three blankets i. Ten towels j. One MP3 player

Question Does anyone know the word for the fundamental problem that we all face?

SCARCITY

Vocabulary Scarcity: the condition that results from society not having enough resources to produce all the things people would like to have

Scarcity: What would parents choose? What would kids choose?

Vocabulary Economics: the study of how people try to satisfy what appears to be seemingly unlimited and competing wants through the careful use of relatively scarce resources What is the difference between a need and a want?

What is the difference between a need and a want?

Needs: necessary for survival Air, food, shelter Wants: item we desire but do not NEED to survive If we cannot have everything, how do we make decisions???

Categorize the following into need or want: Food Gatorade Pizza Sodium Water Sun block Igloo Cadillac Escalade Love Gasoline A weapon Freedom Fire Which category is broader, want or need?

3 Basic Questions a Society Must Face

THE MARKET SYSTEM AT WORK The Three Fundamental Questions... 1. What will be produced with our scarce resources?

THE MARKET SYSTEM AT WORK The Three Basic Questions... 1. What will be produced? 2. How will the goods be produced?

THE MARKET SYSTEM AT WORK The Three Fundamental Questions... 1. What will be produced? 2. How will the goods be produced? 3. Who will get the goods and services?

Basic Economic Concepts Goods Useful items; tangible Services Work performed for someone else Consumers Users of goods and services

Types of Goods Consumer – for personal use Example – happy meal Capital - used for production Example – hammer, tractor

Durable – lasts 3+ years. Ex: appliances, cars Nondurable – immediately used up Ex: – food,paper

Value, Utility and Wealth

Value Worth of a good or service as determined by the market Expressed in dollars and cents Must be scarce and useful

The Paradox of Value What is a paradox? The paradox of value is the contradiction that occurs when essential items have a low economic value, and nonessentials have a high economic value. AKA the diamond/water paradox

Which is better? $10,000 gift v. $100,000 loan?

Utility Capacity to be useful Ability to provide satisfaction Usually depends on person.

Wealth Having goods with value and utility. DOES NOT INCLUDE SERVICES

Review Question: Chapter 1 : Lesson 1 Read pages 6-12 and answer Review Questions on page 12. Hand in Google Class Room.

Question #6 6. Argument Do you think there are any policies or steps that a society can take to avoid scarcity, at least in terms of supplying all the needs of its population? Write an argument for or against the concept that scarcity can be prevented by a society. If you argue that this is possible, describe the steps that can be taken to achieve this. If you argue that this is not possible, explain what makes it impossible.