Warm Up Consider the planning that goes into throwing a party. If you and two other friends were planning a party, what jobs would you need to do? How would you divide up those jobs among the three of you? Would each of you do a part of every task, or would you assign different tasks to different people?

Thursday, September 7, 2017 Objective:  Students will be able to describe how societies answer basic economic questions and the influence of factors of production. Purpose: There are many ways that societies answer economic questions. Also, the factors of production have a major impact on several economic aspects of a product.

The Basic Economic Questions What to produce? This is a production choice influenced by consumer demand What are you going to make with scarce resources? How to produce? This is a resource choice How much of each resource will be used? Will it be labor intensive or will it be capital intensive?

The Basic Economic Questions How much to produce? This is a production choice influenced by consumer demand How much will you make with scarce resources?  For whom to produce? This is an allocation choice Who gets the products after they are produced? How is this decided, by the government or in the marketplace?

Factors of Production Factors of Production: the resources that are used to make all goods and services They are: Land Labor Capital

Land and Labor Land: all natural resources, including oil, water, air, timber, animals, and minerals Found in nature with a fixed supply (cannot be renewed) What are some examples of “land”? Labor: any human effort, physical or mental, that goes into producing goods and services, including marketing, distribution, and selling

Capital Capital: any human-made resource that is used to create other goods and services Physical Capital: All human-made goods that are used to make other goods and services Human Capital: Skills and knowledge gained by a worker through education and experience

This illustration shows two different approaches to the question of how to combine the factors of production. Which approach is most efficient? Explain your answer.

Entrepreneurs Entrepreneurs: Individuals who introduce new ideas for creating new products or new ways to produce products They use the factors of production together to make a profit Characteristics Trustworthy, enthusiastic, professional, risk taker, honest, hard working, knowledgeable

Production Possibilities Curves Graphs help us see how one value relates to another value. A production possibilities curve or graph shows alternative ways to use an economy’s resources. The axes of the graphs can show the categories of goods and services or capital goods and consumer goods.

Is it more efficient to produce 8 million tons of watermelons and 14 million pairs of shoes or 21 million tons of watermelons and no shoes? Explain your answer.

Drawing Production Possibilities Curves You need to decide on the two goods that you want to compare. Production Possibilities Frontier: the line that goes from the vertical axis to the horizontal axis is called the This line shows the most efficient combinations of two goods that a country can produce at any one time. Law of Increasing Costs: as production shifts from making one good or service to another, more resources are needed to increase production of the second good or service

This photograph shows an area of farmland that was converted to housing. The opportunity cost of the housing is the crop that could have been grown on that farmland.

Drawing Production Possibilities Curves Can a country ever move beyond the current PPF curve?

Drawing Production Possibilities Curves YES they can BUT they have to do one of the following: Increase their Technology Add more Resources Once one of the above actions is done, the country can produce beyond the current PPF curve and move the curve outward

New technology, such as these robots, can increase the efficiency of a nation’s production and lead to economic growth.

Based on this curve, how would you describe a situation in which Capeland produces 10 million tons of watermelons and 10 million pairs of shoes?

Create a Production Possibilities Curve A factory can produce both shoes and boots. It can produce either 0 boots and 100 pairs of shoes, 75 pairs of boots and 0 shoes, or some amount of both shoes and boots. Create a production possibilities table and graph to show the factory's options. You can determine how many of each item the factory produces, within the limits set above. Your graph should include at least three points, in addition to the ones described above. Your graph should reflect the law of increasing costs.