C HAPTER 1 W HAT IS E CONOMICS ? S1: Scarcity and Factors of Production S2: Opportunity Cost S3: Production Possibilities Curves

B ELL W ORK : S1 (10 MINUTES ) Get book, folder, and texts Pick up Chapter 1 and Unit Worksheets 3 hole punch them and place in Folders Answer A – E on Unit 1 Essay Warm-up Pgs

S ECTION 1: S CARCITY AND F ACTORS OF P RODUCTION Chapter 1 Essential Question Need to be able to answer this!! “How can we make the best economic choices?” Write at top of S.1 notes Objectives to learn Why scarcity and choice are the basis of economics What entrepreneurs do 3 factors of production and differences bt human/physical economics How scarcity affects the factors of production

K EY T ERMS Turn to page 2 Slideshow on Web /Flash/Ch01/Econ_OnlineLectureNotes_ch1_s1.swf /Flash/Ch01/Econ_OnlineLectureNotes_ch1_s1.swf

W HY ARE SCARCITY / CHOICE BASIS OF ECONOMICS ? How does Scarcity force people to make economic choices? Makes everyone make choices by making us decide which options are most important to us Scarcity states there are limited goods/services for unlimited wants. People need to make choices in order to satisfy m/i wants People satisfy their needs/wants w/ goods/services People’s needs/wants are unlimited, goods/services are not

W HY ARE SCARCITY / CHOICE BASIS OF ECONOMICS ? Economics begins w/idea that people cannot have everything they want/need The fact that limited amounts of goods and services are available to meet unlimited wants is called scarcity. Scarcity forces people to make choices but it is not the same as a shortage. Shortages are temporary while scarcity always exists.

W HAT DO ENTREPRENEURS DO ? Entrepreneurs play a key role in turning scarce resources into goods/services Willing to take risks in order to make a profit They:…. Develop original ideas Start businesses Create new industries Fuel economic growth 1 st Task is to assemble factors of production Land Labor Capital

F ACTORS OF P RODUCTION : L AND Refers to all natural resources used to produces goods/services Resources include: Fertile land for farming Oil Coal Iron Water Forests

F ACTORS OF P RODUCTION : LABOR Labor is the effort people devote to tasks for pay Labor includes: Medical care provided by a doctor Instruction provided by a teacher Tightening of a bolt by an assembly-line worker Creation of painting by an artist Repair of television by technician

F ACTORS OF P RODUCTION : CAPITAL Refers to any human-made resource that is used to produce other goods/services Economy requires both human/physical capital Physical Buildings Equipment Tools Human College education Training Job experience

B ENEFITS OF CAPITAL Key factor for production b/c people and companies can use it to save time/money Benefits of capital Increased efficiency Increased knowledge Better time-management Increased productivity

S CARCE R ESOURCES Checkpoint: Why are goods/services scarce? Goods/services are scarce b/c the resources used to produce them are scarce Only so many natural resources available to produce goods Labor for production can be limited Physical capital can be limited for many industries Each resource may have alternative uses People, businesses, govt.s must choose which alternative they want most

L ESSON CLOSING Entrepreneur simulation on Pearson Class Demonstration Go back and answer the Chapter Essential Question “How can we make the best economic choices?” Found on page 4 of Chapter Warm-up A-D Homework Read Section 2: pgs. 8-12

S ECTION 2: B ELL W ORK Get books, folders 2 Choices; Grab scratch paper and copy “bubble” chart on pg. 8 Put “bubble” chart at top of S.2 notes Answer Questions to captions on pg. 5 and 9 Think, pair, share

S.2: O PPORTUNITY C OST Guiding Question How does opportunity cost affect decision making? Write at top of S.2 Notes Objectives to learn Why every decision involves trade-offs The concept of opportunity cost How people make decisions by the margin Key Terms /Flash/Ch01/Econ_OnlineLectureNotes_ch1_s2.swf /Flash/Ch01/Econ_OnlineLectureNotes_ch1_s2.swf

H OW DOES OPPORTUNITY COST AFFECT DECISION MAKING ? Every time we choose to do one thing, we are giving up the opportunity to do another When we make decisions about how to spend our scarce resources, like money/time, we give up our chance on something else All indiv’s, businesses, and large groups make decisions that involve trade-offs Trade-offs involve things easily/not easily measured Money, property, time, and things not easily (enjoyment or job satisfaction)

H OW DOES OPPORTUNITY COST AFFECT DECISION MAKING ? Businesses and Govt. trade-offs Businesses make trade-offs when they decide how to use their factors of production Famer uses land to plant corn, cannot use same land to plant soybeans Govt’s make trade-offs when they decide to spend money on military needs instead of domestic, or vice-versa Checkpoint: What are trade-offs? Answer economics and you from BW

W HAT IS OPPORTUNITY COST ? Most trade-offs have one of the “rejected” alternatives being more “desirable” than rest That most desirable alternative given up by the decision is the opportunity cost

H OW TO PEOPLE MAKE DECISIONS Decision making grid Can help you decide if you are willing to accept the opportunity cost of a choice Read thru pg. 10 Answer 2 ?s the Margin When you decide how much/less to do you are thinking on the margin Involves comparing opportunity costs/benefits Called cost/benefit analysis

T HINKING AT THE M ARGIN Marginal Costs and Benefits To make good decisions you must weigh the marginal costs against marginal benefits M.Cost = extra cost of adding one unit such as sleeping or getting one more cookie M. Benefit = extra benefit from adding one unit such as sleeping or getting one more cookie Once the marginal costs outweigh the marginal benefit, no more units can (or will) be added Example: 1 more cookie is o.k. b/c it is only 35 more calories but once the unit cost (calories) exceeds what the benefit (satisfaction) is you will not add anymore. Best example is how often you tell yourself you can “sleep just ____ much longer” before there is a cost you aren’t willing to put up with

C OST / BENEFIT ANALYSIS Read and answer figure 1.1 on making decisions at the margin Answer the 2 ?s Decision making at the margin Like opportunity cost, thinking at the margin applies to businesses/governments as well Employers margin when they decide how many workers to hire Legislators margin when they decide how much to increase govt. spending on a project

L ESSON C LOSING Trade-off worksheet Complete and have ready for tomorrow Complete pg. 5: Chapter Essential ? “Scarcity, choices, and you!”

S ECTION 3 B ELL W ORK