It’s all about resources and wants! Scarcity

The Problem Limited Resources Insufficient to Fulfill our Wants

The Goal Increase Individual and Societal Welfare

Welfare Subjective Evaluation of Individual and Societal Well Being “How YOU doin’?”

09/29/09Lesson 1: Scarcity5 Individual Goals: What We Want Health Friends and Family Career Peace Love Stuff

09/29/09Lesson 1: Scarcity6 Social Goals: What We Want 1.More and better education 2.A cleaner environment 3.More and better health care 4.Greater public safety 5.Less stress 6.Preservation of non-renewable resources including natural resources 7.Elimination of poverty

The Question Given limited resources, how do we best use them to maximize people’s welfare?

09/29/09Lesson 1: Scarcity8 RESOURCES: HUMAN CAPITAL Knowledge and skills of the workforce Knowledge and skills of the workforce Your job in school is to develop your human capital.

09/29/09Lesson 1: Scarcity9 RESOURCES : PHYSICAL CAPITAL Goods produced for the purpose Goods produced for the purpose of producing something else of producing something else

09/29/09Lesson 1: Scarcity10 Natural Resources “Gifts of Nature”

09/29/09Lesson 1: Scarcity11 Entrepreneurship Combines other resources, takes a risk, seeks a profit Famous Amos

09/29/09Lesson 1: Scarcity12 Money is not a resource

09/29/09Lesson 1: Scarcity13 Time is not a resource

09/29/09Lesson 1: Scarcity14 Resources Human Capital Entrepreneurship Physical Capital Land – Natural Resource Not Money Not Time

A nation’s wealth is determined by the quantity and quality of its physical and human resources and the political and social infrastructure.

09/29/09Lesson 1: Scarcity16 SCARCITY YOU CAN’T HAVE EVERYTHING YOU WANT! The inability of limited resources limited resources to satisfy people’s wants

Scarcity It’s about RESOURCES and WANTS.

09/29/09Lesson 1: Scarcity18 Which people face scarcity? a.Poor b.Rich c.Selfish d.Selfless

09/29/09Lesson 1: Scarcity19 Scarcity is pervasive Rich Athlete Donald Trump Joe Schmoe Dr. Charkins The President Your parents

You can’t eliminate scarcity

But you can learn to deal with it!

09/29/09Lesson 1: Scarcity22 The test of scarcity It has to be allocated. It has a positive price. It has an alternative use. People who want it have to give something up to obtain it. A choice has to be made

09/29/09Lesson 1: Scarcity23 Some things that are scarce Pencils Yachts Steaks Movies Economists Dentists Refuse collectors Paper clips Automobiles Teachers Shoes Compact Disks Computers Computer programmers

09/29/09Lesson 1: Scarcity24 Some things that are not scarce Air Snow in some parts of the country Garbage Pollution Dirt Used gum Pine cones in Wrightwood Sand at the beach Cowrie shells in Mombassa Drunk drivers

09/29/09Lesson 1: Scarcity25 Scarcity is the Villain!!!!!!

09/29/09Lesson 1: Scarcity26 Why do some very good students get mediocre grades? hospitals turn pregnant women away? servers give less than perfect service? colleges turn students away? colleges have large classes? colleges offer so few courses? some parents spend little time with their children?

09/29/09Lesson 1: Scarcity27 Why don’t we provide organ transplants for all who want them? we prevent death from dirty air? we educate all young children in their native language? you study 24 hours a day? you spend 24 hours a day with your loved one(s)? you sleep more?

09/29/09Lesson 1: Scarcity28 Who is the villain when: You don’t get the service you want at a restaurant? You don’t get the service you want from the registrar? You are put on hold by the secretary? You don’t get tickets to the concert?

09/29/09Lesson 1: Scarcity29

09/29/09Lesson 1: Scarcity30 Your reaction to scarcity Yell, scream, whine, moan, whimper Accept scarcity and see if there is anything you can do to remedy or improve the situation

scarcity is the villain, not the decision-maker. When choices have to be made,

09/29/09Lesson 1: Scarcity32 Attempts to avoid or ignore scarcity don’t work. I’ll put it on the credit card. I’ll get up early to study. Let’s get an apartment. I need a new car; I can get a loan. Let’s go to Vegas.

Scarcity: The Problem Restated The inability of limited resources to fulfill society’s wants.

09/29/09Lesson 1: Scarcity34 Scarcity is not: Poverty –all poor face scarcity –all who face scarcity are not poor Rareness –a rare tropical disease Doesn’t address needs –wants, not needs

09/29/09Lesson 1: Scarcity35 The Goal of Economic Analysis Greater “wealth” for individuals and society Wealth is the subjective evaluation by individuals of their well being.

The Question Given limited resources, how do we best use them to maximize people’s welfare?

09/29/09Lesson 1: Scarcity37 Main Points Resources are limited Land, human capital, physical capital, and entrepreneurship are resources; time and money are not. Scarcity is the inability of our limited resources to satisfy our wants. Wealth is the subjective evaluation of well being. The goal of economic analysis is to increase individual and societal wealth.