Bellwork 1. What do you expect to learn in Economics? 2. What is your job as the Economics student?

Cornell Note Taking is emphasized here at THS Essential Question: What is Economics? QuestionsNotes Summary: Economics is the study of how people choose from limited resources to meet their needs and wants.

Introduction to Economics 1. Scarcity and Factors of Production 2. Opportunity Cost Essential Question: How do we allocate limited resources?

Making Choices  Need - something like food, air, shelter, water (necessary for survival)  Want - item we desire—not essential to survival  CAN’T HAVE EVERYTHING YOU NEED OR WANT—YOU HAVE TO MAKE CHOICES!! Essential Question: How do we allocate limited resources?

What Is Economics?  Economics is the study of how people seek to satisfy their needs (essentials) and wants (desires) by making choices.  Decisions have costs. Economics studies the costs, benefits, expectations and results of choices. For example:  You must choose how to spend your time  Businesses must choose how many people to hire Essential Question: How do we allocate limited resources?

Scarcity and Shortages  Scarcity occurs when there are limited quantities of resources to meet unlimited needs or desires  ALL GOODS AND SERVICES PRODUCED ARE SCARCE.  Shortages occur when producers will not or cannot offer goods or services at current prices  Can be long-term or short-term.  Holiday seasons  Wars and droughts Scarcity versus Shortage What is the difference? Essential Question: How do we allocate limited resources?

The Factors of Production  Land All natural resources that are used to produce goods and services.  Labor Any productive physical or mental effort a person devotes to a task for which that person is paid. Workers, laborers.  Capital Any human-made resource that is used to create other goods and services.  Physical Capital- machinery and equipment made by labor to increase the productivity of labor.  Human Capital- the knowledge and skills that makes labor more productive. Essential Question: How do we allocate limited resources?

The Factors of Popcorn Production Land Popping Corn Vegetable Oil Labor The human effort needed to pop the corn Capital Corn-Popping Device Essential Question: How do we allocate limited resources?

The Economic Problem  What goods and services should an economy produce? – should the emphasis be on agriculture, manufacturing or services, should it be on sport and leisure or housing?  How should goods and services be produced? – labour intensive, land intensive, capital intensive? Efficiency?  Who should get the goods and services produced? – even distribution? more for the rich? for those who work hard? Essential Question: How do we allocate limited resources?

Opportunity Cost  Definition – the cost expressed in terms of the next best alternative sacrificed  Helps us view the true cost of decision making  Looks at what is given up when a decision is made.  Implies valuing different choices Essential Question: How do we allocate limited resources?

FIVE appealing VACATION Destinations… Hawaii Paris Dunns River Falls, Jamaica AlaskaIreland Volunteer: What is your first choice? What is your second choice?

Making Economic Decisions  1 st Choice is what you would choose to do  2 nd Choice is your opportunity cost (you give it up to do option 1) Essential Question: How do we allocate limited resources?

How does opportunity cost affect decision making? Trade Offs  Trade-offs are all the alternatives that we give up whenever we choose one course of action over others.  The most desirable alternative given up as a result of a decision is known as opportunity cost.  “Time for money and wheels”-get a part time job (time) in order to get a car Marginal Thinking  Process of deciding whether to use a resource  Cost /benefit analysis-what you will sacrifice Essential Question: How do we allocate limited resources?

The Decision-Making Grid  Economists encourage us to consider the benefits and costs of our decisions. BenefitsEnjoy more sleep Have more energy during the day Better grade on test Teacher and parental approval Personal satisfaction DecisionSleep lateWake up early to study for test Opportunity costExtra study timeExtra sleep time Benefits forgoneBetter grade on test Teacher and parental approval Personal satisfaction Enjoy more sleep Have more energy during the day Sleep lateWake up early to study Alternatives Karen’s Decision-making Grid Essential Question: How do we allocate limited resources?

Thinking at the Margin  When you decide how much more or less to do, you are thinking at the margin. Options 1st hour of extra study time 2nd hour of extra study time 3rd hour of extra study time Benefit Grade of C on test Grade of B on test Grade of B+ on test Opportunity Cost 1 hour of sleep 2 hours of sleep 3 hours of sleep Essential Question: How do we allocate limited resources?

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