SCARCITY, CHOICE, TRADE- OFFS, OPPORTUNITY COST

 Land (raw materials)  Labor  Capital (factories, machinery, tools)  Entrepreneur – somebody to put it all together (literally, someone who undertakes a task)

 There’s not enough to go around  There are not enough resources for everyone to have everything they want  Scarcity: Something is scarce if it’s desirable but limited  Everything is scarce

 When an economic choice is made, an alternative is always foregone  Example: If you only have $10, you could go to the movies or go out to eat, but not both  Other examples?  Non-financial examples?

THREE BASIC QUESTIONS OF ECON:  What to make?  How to make it?  Who gets it?  Allocation depends on the system you’re using – traditional system (pre-capitalism), capitalism/market, command economy.  We use the mixed system in USA – some decisions made by market, some by government/command.

 Groups of 4  10 minutes to decide  Share choices and reasoning

 Unlimited wants?  Do we want too much? What is really a need? For some people something is a need for others it’s not…

 Choosing one thing makes you give up something else Opportunity cost The next best alternative you forego when making a choice

 Production Possibilities Curve  Production Possibilities Frontier

 Opportunity Lost – Opportunity costs  On the PPF – introducing the production possibilities frontier  On the PPC – the PPF revisited

 What’s your opportunity cost for buying a bunch of new clothes?  Playing sports?  Having a part-time job?  Dating only one person in high school?  Of the nation spending more on the homeless vs. on schools?  Paying off the national debt?  Government creating more jobs?

 the guns vs. butter analogy 

 Where would unemployed resources (aka: an inefficient economy) be on the PPC? Growth?

 Come up with your own examples or use these:  hours of study vs. sleep;  work vs. play in a 10-hour day;  part-time job vs. spending time with girlfriend,  planting carrots vs. strawberries in a garden;  stuff you can buy with limited $  Investment vs. consumption  Popularity vs. grades

Central themes in economics

Discuss these big questions & write down your answers in your journal (5 points) 1. Is it fair to have very rich and very poor people? How does one “deserve” to be rich or poor? 2. Are people born with equal abilities and equal wealth? 3. Can you say that societies give equal chances to all? 4. So – should society take from the rich to give to the poor? Why or why not? How?

 To what extent should governments intervene in the allocation of resources?  Advantages of a large government role?  Disadvantages of large government role?  Depends on the economic system…  DVD Ch. 2: Capitalism v. Socialism – The Cuban Quandary

 Growth: An increase in real GDP (a country has more stuff!) = gross domestic product – the total quantity of goods and services produced in a country (only counts income involving money)  Development: An improvement in people’s quality of life is measured by the HDI (human development index). How does it get calculated?  HDI includes: the level of GDP per capita (as an indication of income levels), literacy (as an indication of education levels), and life expectancy (as an indication of levels of health).  Which is more important? Is there a trade-off between the two?

 HDI is a measurement of the quality of life in a country  EFI is a measurement of the amount of economic freedom in a country (high EFI means low level of government intervention)  Countries with high HDI numbers tend to also have high EFI numbers

 Group Activity – show on a chart how you think the total wealth of the USA is distributed. Place on the X line the population arranged by income.  To what extent might the goal of economic efficiency conflict with the goal of equity? WHY might that be the case? Which goal is more important?  Occupy Wall Street - the 1% vs. the 99%  DVD Ch. 23 Pareto Optimality & Pecan Pie

 Using resources at a rate at which they are able to replenish themselves and the environment is not depleted in the process of production.  The threat to sustainability as a result of the current patterns of resource allocation  Why is the concept easier said than done?  Sustainability in a Changing World video (Christian Slatter & Enzo Tiezzi

 How obligated are wealthy countries to help LDCs improve?  Why do they need our help?  What’s in it for us?  Why not help Americans first?  Should the US give more foreign aid or less?  What role should politics and economic benefit (e.g. natural resources) play in which countries we help, vs. degree of need?