Introduction to Economics Goal 7 Introduction to Economics

Economics - A science that deals with the allocation of scarce resources for the purpose of fulfilling society’s needs and wants. Science knowledge gained through experience, study, and experimental investigation. Allocate – to distribute, use.

resources - something that can be turned into or used to create a good or service scarcity – Too many wants not enough resources good – touchable objects service – actions or work done for others need – a necessity want – a desire

Good or Service? Automobile Education Coffee cup Book Taxi ride

Need or Want? Water CD Toilet Paper Medicine Jewelry

What you give up when you make a choice. Scarcity Too many wants not enough resources. You can’t have everything you want, so you have to make choices. Opportunity Costs What you give up when you make a choice. Trade-offs You give up one good to choose another good.

Examples Identify the scarcity and the opportunity costs in each. S1: The school board only has enough money to build either a new gym or a library. The board chooses to build the library. Scarcity = Opportunity cost= S2: The General Assembly must decide between allocating financial resources to hurricane relief or to the Smart Start program for children. Assembly men choose to increase funding for hurricane relief.

Examples Identify the scarcity and the opportunity costs in each. You have 1 dollar. For breakfast you can buy a donut for 75 cents or a bagel for 75 cents. You buy the bagel. Scarcity = Opportunity cost= Your company produces glass vases. Your supplier lost his warehouse to a fire, and can only supply one type of vase- either a round vase or rectangular vase. You choose the rectangular vase.

Scarcity = Opportunity cost= S3-You have 1 dollar. For breakfast you can buy a donut for 75 cents or a bagel for 75 cents. You buy the bagel. Scarcity = Opportunity cost= S4 Your company produces glass vases. Your supplier lost his warehouse to a fire, and can only supply one type of vase- either a round vase or rectangular vase. You choose the rectangular vase.

Identify the scarce resource and the opportunity cost. S5 You have $60. You want to buy the red sweater and the blue jacket, but each costs $50. You buy the red sweater. S6 You are the fire chief in a town with a population of 20,000 people. There are only enough fire engines to fight one major fire. Unfortunately, a major fire breaks out at the local grocery store and at the local theatre. You send your fire fighters to the theatre. S7 You are the manager of a supermarket. Lots of customers are waiting to be checked out at Moe’s register and Tasha’s register. You only have one bagger working, so you send her to Tasha’s register.

Three Basic Economic Questions Every country must answer the three basic economic questions. How they answer the three basic economic questions tells what type of system the country is. (Later) Businesses answer the three questions also.

Three Basic Economic Questions For whom to produce? How to Produce What to Produce?

FACTORS OF PRODUCTION- the resources used to produce a good or service Natural resources (example: cotton) Capital resources (example: thread) Entrepreneur (example: T. W. Stewart, 1893) Labor (example: factory worker) Objects supplied by the earth that are used by people to create a good or a service Human resources; people who perform jobs to create a good or a service Man-made goods that are used to produce other goods The person who takes a risk and combines the other factors of production to create a good or a service.

Examples Identify factors of production for a jar of Jiff peanut butter. __________________________ ________________________ _________________________ ____________ _________ ________ Natural Resources Capital Resources Entrepreneur Labor

Identify a service and list the factors of production. Service ________________________________________ Labor _________________________________________ Natural resources ____________________________________________ Capital resources ____________________________________________ Entrepreneur ____________________________________________

Explain the division of labor found in the following situations:  Federal government _____________________________________________________________________________________________________________________  Workers at a grocery store ________________________________________________________________________________________________________________________