Coach Saucedo AP Macroeconomics Economics

Classroom Rules BE ON TIME. NO CELLPHONES. Put them in the “bucket” if I ask you to. NO SLEEPING. Stand-up in the back, or go see your A.P. BE PREPARED – Homework, pen, pencil, notebook. DO NOT TALK WHILE I AM TALKING!!! I DISLIKE REPEATING MYSELF! ASSIGNED SEATING. NO COMPROMISE. NO FOOD OR DRINKS – UNLESS I GIVE THEM TO YOU. NO MORE THAN 5 MINUTES WITH A RESTROOM PASS. IF YOU TAKE MORE THAN 5 MINUTES YOU WILL NOT GET ANOTHER PASS FOR THE 6 WEEKS. IF YOU ACT LIKE SENIORS I WILL TREAT YOU LIKE SENIORS – WITH THE UTMOST RESPECT YOU DESERVE. I ARRIVE AT SCHOOL AT 8:AM AND LEAVE AT 3:30PM. COME AND SEE ME ANYTIME. YOU WILL BE EXPECTED TO WORK THE ENTIRE CLASS PERIOD.

“Intelligent people want to learn, but foolish people are satisfied with ignorance” Proverbs 15:14 “I have good plans for you, not plans to hurt you. I will give you hope and a good future” Jeremiah 29:11 Before you speak, ask yourself, is it kind, is it necessary, is it true, does it improve on the silence? Sai Baba

What Does Time Mean To You? 6,570 Days If you are 18 yrs old, the number of days you have been alive. 28,470 days If you live to 78 yrs old the number of days you will have lived IT IS UP TO YOU AS TO HOW PRODUCTIVE THIS TIME WILL BE

I want to talk to you about Three four-letter words:

There are NO other substitutes Tell me what you

What are we trying to satisfy?

I want to talk about the last four-letter word

Tell me what is It doesn’t cost anyone, anything! TINSTAAFL “ T here I s N o S uch T hing A s A F ree L unch”

What is Economics? Economics is the social science science that studies how societies societies (individuals, (individuals, businesses, and Government) Government) allocate allocate their scarce scarce resources resources to satisfy unlimited wants. Three IMPORTANT words –Allocate –Allocate – to assign, allot, distribute –Scarce –Scarce – insufficient to meet demand, not enough to go around for all –Resources –Resources – “things” available to a society that are used to attempt to satisfy unlimited wants.

“No horn of plenty” Scarcity Choices What is given up ECONOMICS Choices L imited R esources Supply Unlimited Needs and Wants Demand

ECONOMICS - “science of scarcity” choices - the study of the choices people make in an effort to satisfy unlimited needs and wantslimited resources their unlimited needs and wants from limited resources.

The principal problem of Economics is… Scarcity

“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics”. --Thomas Sowell

Resources or “Factors of Production” Land – Natural Resources Acreage, rivers, lakes, ports, natural resource (oil, precious metals, minerals) Labor – Human Resources Physical and Mental talents that produce goods and services Capital – “stuff you use to make other stuff” All manufactured goods and services used in producing consumer goods. Examples: Tools, machinery, equipment, trucks to carry goods, airplanes, etc. Entrepreneurship – 1.Someone who takes the initiative in using or combining the above Resources to produce a good or service. 2. Someone who is innovative, a risk taker, and makes basic business decisions. 2. Someone who is innovative, a risk taker, and makes basic business decisions. Remember -- ALL THESE RESOURCES ARE IN LIMITED SUPPLY THEY ARE SCARCE!!!!

Land natural resourcesNature’s items“gifts of nature 1. Land [natural resources] – Nature’s items [“gifts of nature”] In the earth A. In the earth - coal, oil, water, fossil fuels, etc. On the earth B. On the earth – vegetation and water In the atmosphere C. In the atmosphere – sun, wind, and rain starting point [Land is the starting point of all production. “Stuff” “Stuff” from which everything is made.. The Four Factors of Production Resources beget production, which beget income, which beget wealth. “ Gifts of Nature ” Water Wind Sun Fossil fuels

. Labor human resources“effort” 2. Labor [human resources] {“effort”} “paid work” anyone who works [“paid work”] “brain-power” [Labor is the “brain-power” and “muscle-power” “muscle-power” of human beings] Physical A. Physical – pro athletes & lumberjacks Intellectual B. Intellectual – ministers, doctors & lawyers “ Hired Help ” *Most important resource – 70% of input cost

. Real Capital v. Financial Capital FINANCIAL CAPITAL [stocks, bonds, and money] REAL CAPITAL [tools, machinery, & factories] Can produce something directly with these Can’t produce anything directly with these

. “Real Capital” [machinery, physical plants & tools] [capital is a factor of production] v. “Financial Capital” [stocks, bonds, & $] [not factors of production] A product can be both a consumer good & a capital good –depends on its use. Ex: Jet aircraft used by a movie star to visit friends (consumer good). The same aircraft used by a business manager to serve customers [capital good]. Ex: F150 pick-up to deliver produce [capital good] or take family to church [consumer good] Capital Resources “man-made inputs” 3. Capital Resources – all “man-made inputs” used in the (tools, machinery, and physical plants) production process (tools, machinery, and physical plants). Capital goods A. Capital goods – goods [machinery, buildings, & tools] used to produce other goods produce other goods. [crane, Ford plant, hammer] “future consumption” [products meant for “future consumption”] Consumer goods“immediate consumption” B. Consumer goods – products meant for “immediate consumption”. “man-made inputs”

Entrepreneurship starting a new businessintroducing a new 4. Entrepreneurship – starting a new business or introducing a new product“Sparkplugs” product. “Sparkplugs” who introduce the product or start the new combines land, labor, & capital to produce products business. He combines land, labor, & capital to produce products. Resource paymentsrent Resource payments. The resource owners receive rent [for wagesinterest the use of their land; wages [for their labor]; interest [payment profits for financial capital], and profits [for their entrepreneurial ability]. Rent Wages Interest Profits Land Labor Capital Entrepreneur.

The Three Fundamental Questions What will be produced with our scarce resources?

The Three Basic Questions How will the goods be produced? 1. What will be produced?

The Three Fundamental Questions How will the goods be produced? 1. What will be produced? 3. Who will get the goods and services?

The Case for the Market System Efficiency, Incentives, and Freedom “invisible hand” Adam Smith said the “invisible hand” determines what gets produced, how, & for whom. It is the invisible hand that moves us along the PPC. The invisible hand is now market mechanism called the market mechanism. Its essential feature is price signal the price signal.

Most needy or most money Scarcity LimitedResources UnlimitedWants Choices WHAT G/S to produce? WHO will receive the G/S produced? [Eskimo/pygmy] Answers to the above determine: ECONOMIC SYSTEMS BASICECONOMICPROBLEMS TRADITIONAL FREE MARKET COMMAND HOW will the G/S be produced?

1.Traditional 2.Pure Command 3.Pure Market 4.Mixed a. Capitalism b. Democratic Socialism c. Authoritarian Socialism [Communism] The way the 3 basic questions are answered Determines an economic system. 1.Traditional-[where “CUSTOM RULES”] A. What, how, and for whom are answered by tradition B. Change is resisted, no technology [clashes with tradition] C. Heredity and caste system limit the economic role of individuals. D. 35,000 Pygmies in the Ituri Forest are an example. E. Men hunt & women/children gather/prepare food. F. Wear loincloths from bark of fig trees [“PYGLER” or “PYBUGLE Boy”] G. Eat mushrooms, berries, roasted grasshoppers, monkeys, & plantain H. Eat bone marrow & everything else in an elephant. “ PYGACHE ”, “ LARDACHE.” I. Used to be “ PYGACHE ”, big Pygmies, have to wear “ LARDACHE.” Economic Systems the way society produces products Economic Systems – the way society produces products

PURE COMMAND “GOVERNMENT RULES”. 2. PURE COMMAND - where the “GOVERNMENT RULES”. The government controls all resources. What, How, and For Whom answered by the government. PURE MARKET 3. PURE MARKET – where “INDIVIDUALS RULE”. “INDIVIDUALS RULE”. Individuals and firms control all resources. The government has no say. WHAT, HOW & FOR WHOM are decided by individuals. MIXED MIXED – all countries have mixed economic systems How are these words used in everyday life? 1.Traditional 2. Command 3. Market Karl Marx Adam Smith

mixed economy both market signals and government directivesA mixed economy is one that uses both market signals and government directives to allocate goods & resources. combination market signals and governmentMost economies use a combination of market signals and government directives to select economic outcomes.

When faced with SCARCITY of resources, decisions have to be made about how to use those resources Trade-offs Opportunity Costs

Trade-Offs This is the decision making process that is occurring in your mind right now! Am I going to pay attention to what Coach Saucedo is saying, or am I going to daydream? Am I going to come to class or go buy a lottery ticket? Am I going to stay in school or go find a full time job? Each and every decision you make has a cost!! Not necessarily a cost in dollar terms, but a cost in that you must give up something in order to get more of something else.

Trade-offschoice Trade-offs – decision ( choice ) to get more of one thing means to accept less of another. Opportunity Cost – 2 nd Choice (most important concept in economics) [what you sacrifice when you make a choice] Lorenzo Borghese Jen Sadie “I’m in love with both, but can have only one.” The Bachelor

Opportunity Cost The “price you pay” for each decision you make is called the OPPORTUNITY COST. Opportunity cost is vital to the understanding of economics. “The amount of a product or service that must be forgone (given up) in order to obtain more of the next best alternative product or service”

S carcity Choices Opportunity Costs O pportunity Benefit Opportunity Set [“what is possible for $10,000”] O pportunity Cost

And – As 40 Million Watched, J oe M illionaire chose Z ora over S arah And Why Didn’t Joe Pick Sarah? This Is The Reason He Gave Her.

Always get a p rom d ate or 2 Better Job Better chance in college You always do your homework BeautifulSpouse Better chance at the best colleges Cheerleaders doing flips to get your attention And – They ask you! Better chance to be the boss R eport C ard A Econ A English A Calculus A Journalism C Sex Ed Fewer home problems LearnResponsibility BetterSelf-esteem Opportunity Cost of Doing Your Best In School

Beautiful Spouse & Great Kids comes from a good education Beautiful Spouse & Great Kids [comes from a good education] And what kind of kids does the educated worker end up with?

What Kind Of A Sports Car Do You Drive What Kind Of A Sports Car Do You Drive [because of a good education]

Opportunity Cost NOT Opportunity Cost [of NOT doing your best] “No, I will not go to the prom with you. You are a loser.” You don’t do your best More problems at home He will have a difficult path [Poor self-esteem]

Opportunity Cost [of NOT doing your best in school] Worse Job “Paper or Plastic?” “Do You want fries with that?” with that?”

Men have these 4 choices Women also have 4 choices. And Your Spouse And Your Spouse [due to a bad education]

And Your Kids “Sorry” – because of a bad education