Choices, Choices, Choices,... Concept(S): Scarcity, Opportunity Cost, & Trade Offs Skills: Decision Making

  Looking at the importance of choice  Introduction to three major concepts of economics: 1.Scarcity 2.Trade offs 3.Opportunity Cost You’ll reflect on all this by end of period with some questions to consider What you’ll be doing today…

  Your professor first semester in college is describing her policy on late work. She says you can turn in late work even after the deadline. But, if you turn the assignment in on time, and you don’t like the grade, you can re- submit it for review for a higher grade. If you turn in the work after deadline, and you don’t like the grade you cannot get it reviewed for higher grade.  Would you turn in your work on time? Or submit your work after the deadlines? Explain your thought process Preamble

 Instructions:  With a partner, walk around and look at all the items posted on the wall –  For every pair of items you see- Answer this question:  “Which do you prefer and why?”  Explain to your Jedi partner your reasons for your preference- Jedis you speak first  You will have 1 min each to discuss with your partner Choices!

 Discussion Questions:  What do you gain from your choice?  What do you lose from your choice?  Why is choice so important in our daily lives? Debrief…

 Part 1: The Basics

  Economics – the study of how individuals and societies make decisions about ways to use scarce resources to fulfill wants and needs.  What does THAT mean?!!??!! WHAT IS ECONOMICS???

  Macroeconomics  The big picture: growth, employment, etc.  Choices made by large groups (like countries)  Microeconomics  How do individuals make economic decisions The Study of Economics

 ALL Societies (we) must figure out  WHAT to produce (make)  HOW MUCH to produce (quantity)  HOW to Produce it (manufacture)  FOR WHOM to Produce (who gets what)  WHO gets to make these decisions? ECONOMICS: 5 Economic Questions

  Definition: The items used to make other goods (products) What are resources?

BUT, there’s a Fundamental Problem: SCARCITY: unlimited wants and needs but limited resources

Choices, Choices  Because ALL resources, goods, and services are limited – WE MUST MAKE CHOICES!!!!

 We make choices about how we spend our money, time, and energy so we can fulfill our NEEDS and WANTS. What are NEEDS and WANTS? Why Choices?

  NEEDS – “stuff” we must have to survive, generally: food, shelter, water,  WANTS – “stuff” we would really like to have (Fancy food, shelter, clothing, big screen TVs, jewelry, conveniences... Also known as LUXURIES Wants and Needs, Needs and Wants

VS.

 You can’t have it all (SCARCITY – remember?) so you have to choose how to spend your money, time, and energy. These decisions involve picking one thing over all the other possibilities – a TRADE-OFF! TRADE-OFFS

Trade-Offs, cont.  Chew on This!: What COULD you have done instead of coming to school today?  These are all Trade-Offs!

 A special kind of Trade-Off is an OPPORTUNITY COST = The Value of the Next Best Choice (Ex: Sleeping is the opportunity cost of studying for a test)

 Opportunity Costs I have $12 in my pocket  Then, what happens to the movies… If I buy a pizza … Q: What is the opportunity cost of buying pizza?

  Several students were talking about taking time off after graduating high school so they could spend two years traveling around the world. One student remarked, “It’s a great idea, but can you imagine how much it would cost? Even if you backpacked and camped out, it would still cost you $10,000!” An economics student replied that the sum of money would not amount to even half the cost. Explain what the economics student is talking about. *Hint- Review the concepts of scarcity, trade offs, & opportunity cost to respond to this scenario. What are the students gaining? What are they losing? What are the alternatives (other options) *Be sure to also underline or highlight the scarce resources, tradeoffs and/or opportunity cost Practice

  Discuss the concept of Outsourcing  Introduce the concept of Factors of Production  Look at some news coverage and a TV show called 30 days about the pros and cons of Outsourcing Our Plan for the day…

 Preamble We are going to watch a promotional video from the garment manufacturing and retail company American Apparel Things to watch for: 1.What makes AA different than other clothing companies? 2.Why do you think they have become so popular? American Apparel Sewing 5th Floor AA Sewing MADE IN THE USA!

  Listing ALL FOUR Factors of Production  Explain the process of production identifying all the components (pieces of production) Wrap Up For the Day Will Be…

Production  So how do we get all this “stuff” that we have to decide about? Decisions, decisions …

 PRODUCTION, cont.  Production is how much stuff an individual, business, country, even the WORLD makes.  But what is “STUFF”?  STUFF – Goods and Services.  Goods – tangible (you can touch it) products we can buy  Services – work that is performed for others

 Goods & Services Goods Services

Factors of Production  So, what do we need to make all of this Stuff?

 4 Factors of Production LAND Water, natural gas, oil, trees (all the stuff we find on, in, and under the land LABOR Physical and Intellectual  Labor is human power

 4 Factors of Production CAPITAL  - Tools, Machinery, Factories  Human capital is brainpower, ideas, innovation ENTREPRENEURS  Investment $$$  The risks of investing

 Which Factor of Production is it?

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 Which Factor of production is it?

  Factors of Production – what we need to make goods and services  Producer – company that makes goods and/or delivers services  Consumer – people who buy goods and services (formerly known as “stuff”) THREE parts to the Production Process What’s the relationship like?

 Production Process Capital Labor Land Entrepreneurship Production/Manufacturing “Factory” Goods Services Consumers

Capital Goods & Consumer Goods  Capital Goods: are used to make other goods  Consumer Goods: final products that are purchased directly by the consumer

CHANGES IN PRODUCTION  Division of Labor – different people perform different jobs to achieve greater efficiency (assembly line). You do your job, and I will do my Job and we will be more EFFICIENT

CHANGES IN PRODUCTION  Consumption – how much we buy (Consumer Sovereignty [control]) The DELL store is empty because…. Everyone is at the APPLE STORE!!! Can you identify what problem Dell has in this scenario?

  With your jedi partner, take 3 mins to brainstorm what options does Dell have if the Apple store is as full as seen in the pic before  Let’s bring these out to the floor… Dell can do what lots of American companies have been doing for quite some time… Outsourcing- The practice of companies sending production to other countries where materials and labor are cheaper = this reduces costs for companies = can charge less for goods/services… = what choices will consumer make? Choices that Dell has to make

 What outsourcing looks like in 21 st century Carrier-An American AC/Heater company Indian manufacturing workers

  We Will be watching an episode of the TV show 30 days by Morgan Spurlock (Supersize Me)  Pay attention to the choices that tech companies have made  How do these choices impact American workers? Indian workers?  What are the trade offs and opportunity costs of outsourcing? Is outsourcing good or bad for Americans?

Practice with Factors of Production Land Open field of grass where the cows graze Labor - Farmer who milks cows -Cheese maker -Packaging -Delivery Capital - Milking tools -Farm -Containers, etc. Entr. - Money -Ideas -Experience on cow farming and cheese making

  List & Describe ALL FOUR Factors of Production  Explain the process of production identifying all the components (pieces of production) (The Three parts of production & the visual)  Do you agree or disagree with the practice of outsourcing? Explain your rationale- Identify and discuss the trade offs and opportunity costs of Outsourcing Wrap Up For the Day!

  Define Scarcity & provide examples  Define Trade Offs & provide examples  Define Opp Cost & provide examples  Explain why and how choice is impacted by all THREE above  List ALL four Factors of Production with example for each  Explain the production process (the diagram) with the THREE components  Discuss how outsourcing works, the trade offs, and opportunity costs of this business practice Can you do the following?...