Unit 1 Scarcity & Choice How do people make choices?

EQ What is your economic literacy score? 20 questions pre-test on economic knowledge

Your dreams  Your future What will make you Needs and Wants… Source of Income… Intangibles that money can’t buy… Create a visual using pictures, images, drawings, words

What is Economics? Economics is the study of how individuals and societies use their scarce resources to satisfy their unlimited wants. Scarce = limited Resources = things used to make other things (goods & services)

Land

Labor

Capital

Entrepreneur Organize Resources Consumers buys things they need or want. Producers make money.

Basic Economic Terms EconomicsThe study of how individuals and societies use their scarce resources to satisfy unlimited needs. ScarcityLimited; time, money, resources, and space ResourcesFactors of production; land, labor, capital “Things used to make other things” LandItems found in nature LaborWork done by people CapitalTools, equipment, factory, building NOT $ GoodsTangible items of value; computer ServicesIntangible items of value; fixing a car EntrepreneurStart a business; goal to make $ ProducerBusiness who sells goods/services ConsumerPeople who buys goods/services

How do you deal with scarcity? Your alarm went off this morning… You have $1 left on your lunch account… CONGRATULATIONS!!!! You have just received your HS diploma What are you going to do with your life?

Decision-making tool #1 Cost-benefit analysis This decision-making tool is best use when solving the problem of scarcity when you need to compare positives and negatives of which action to take or wise choice to make. Alternative: any possible course of action in a given situation. Benefit: positive consequence of action Cost: negative consequence of action Trade-off: giving up one thing to gain another Wise Choice: decision which gives the greatest benefit, least cost

Cost-Benefit Analysis AlternativeBenefit Cost  Wise choice is…

Economists Study the way in which individuals and society use their scarce resources to satisfy their unlimited wants. Paid professionals that predict people’s behavior

Economists Handy Dandy Guide

Why is Elvis reported as being alive? Use your “handy dandy guide” to solve the mystery!!!

TNSTAAFL Economics can be summed up in one word: TNSTAAFL “There’s no such thing as a free lunch”

TNSTAAFL Relationship between choice & opportunity cost… 20 hours free time Simplify to 2 options Illustrate scarcity, trade-off, & opportunity cost

Production Possibility Curve Production possibilities ~ different quantities of goods that an economy can produce with given resources, time and technology. Economists use the Production Possibility Curve (PPC) to demonstrate scarcity, trade-off, & opportunity cost for a society.

Production Possibility Curve Scarcity leads to maximum production Trade-off to increase production of one; have to decrease production of another Inefficiency can get more without giving anything up What is the opportunity cost of moving from Point A to B?

Scarcity,Trade-off & PPC Production Possibilities Curve (PPC) illustrates the maximum output combination of two goods; “on the line” Points A & B desirable; “best”? Point C is not possible Point D is inefficient To increase production of guns; Must decrease production of butter.

Ravinia pp #1-7