“Ya can’t always get want ya want…” Mick Jagger, The Rolling Stones, Students understand common economic terms and concepts and economic reasoning Students analyze the elements of the U.S. labor market in a global setting Students analyze the aggregate economic behavior of the U.S. economy.

With Limited Resources, Scarcity is Everywhere Goods seem to be everywhere! –Physical objects Services seem to be everywhere! –Activities done for us by others Shortages are temporary, scarcity is forever –Shortage: lack of something that is desired (occurs when less of a good or service available) Fashion Fad, Wars, Disasters can disrupt production, Restaurant specials! Finite…

Economic Decision Making Our Wants Always Exceed Our Resources –Food, shelter, water –Our ability to satisfy our wants (and sometimes our needs) is limited Time Bill Gates

How Do We Satisfy Economic Wants? Factors of Production –Inputs: scarce resources that go into the production process –Outputs: goods and services that are produced by using resources –Production Equation: Land + Labor + Capital = Goods and Services (entrepreneurship: willingness to take economic risks) - #4?

Land Resources: The “Gifts of Nature” All of the natural resources –Perpetual resources Solar, wind –Renewable resources Forests, fresh water, fish –Nonrenewable resources Fossil fuels

Labor: Putting Human Capital to Work Produces goods and services for a wage Human Capital: strip person of all but self and what skills are left? –“High Human Capital” = lots of skilled workers –“Low Human Capital” = unskilled workers CORRELATION BTW LEVEL OF HUMAN CAPITAL AND STANDARD OF LIVING (Japan vs Nigeria) “75% of a countries wealth lies with the education, training, and skills of its people” – Gary Becker

Capital Resources: Tools, Machines, and Buildings Physical Capital or Capital Goods –Used in the production of goods and services –Difference btw “consumer good” vs. “capital good” –Physical capital can replace labor (vacuum cleaner, ATM machines)

Entrepreneurship as a form of Human Capital Combines land, labor, and capital in new ways to produce goods and services Roles: –Innovator: new inventions/technologies –Strategist: vision and key decisions –Risk Taker: investment challenges/succeed or fail? –Sparkplug: turns ideas into reality Nolan Bushnell (Atari/Chuck E. Cheese)

Working Smarter Boosts Productivity Use inputs effectively, can increase productivity Productivity ratio: productivity = output input *Lumber mill: output = total number of board feet, input = total hours of labor, productivity = board feet of lumber produced in an hour ***How could productivity be increased?

Maximizing Utility: What we want when we choose Utility = satisfaction one gains from consuming a product or service or from taking an action –Improving our lives (vaccinations) Tradeoffs: scarcity-forces-tradeoffs –Business as well as individuals –“guns vs butter” analogy Opportunity cost: The best thing we give up to get what we want –Value of the next best alternative IPhone vs Blackberry

Making “how much” decisions at the Margin Marginal Utility = extra satisfaction from on addition of unit of a good or service –Marginal utility diminishes as you get more –Negative utility = going overboard Apple juice/homeless person example *law of diminishing marginal utility

How can we measure what we gain and lose when making choices? Production Possibilities Frontier –Economic model using a line graph –Use of two (2) goods –Combination of production of both goods using available resources/technology most efficiently Study hours for Math and/or History Production Possibilities Curve or Frontier: available combinations with current resources

PPF Example

Measuring Opportunity Costs Using the PPF Bananas vs cell phones? –Finite land for factories or plantations –Labor trained for bananas or cell phones –Analysis of the combinations… Economic efficiency using the PPF –Using resources to produce maximum results –Each point on graph represents efficient use of resources –Snapshot of an economy’s production possibilities