Vocabulary Investment- Using resources that could be used immediately for the purpose of gaining a greater benefit later. Law of Diminishing Returns- The amount of benefit/output decreases when a changing variable input is added to a fixed output.

REVIEW w hat are ways producers try to increase productivity? What is the difference b/w specialization and division of labor? How does using specialization and division of labor lead to more production and better quality? Summarize the difference between the cottage industry and factory industry. What is the difference between an invention and an innovation? What is robotics? What is automation? What is agribusiness? Summarize the difference between a skilled and unskilled worker? What is the difference between an blue collar job and a white collar job?

Warm up? What is an investment? Using resources that can bring you immediate benefits for the purpose of gaining greater benefits in the future is an investment. An example of financial investment is when people buy stock

1.Selling laptops at discount prices and producing so many of them so as to still make a huge profit is an example of what? A.Assembly line technology B.Adequate business organization C.The practice of mass production D.The application of automation 2.Of the following, who would most likely earn the highest wage/salary? A.An uneducated blue collar worker B.A skilled white collar worker C.Someone who graduated high school and has very little additional training D.Someone who works as a hired hand on a farm

Resources & Investment

Investment in Goods Capital goods – Products used to make other goods or provide services. – Investing in capital goods allows workers to do more work in a given timeframe Productivity Consumer goods – Items purchased for final use. – Ex: ipod or a toaster Recycling can increase investment.

Investment through Education When laborers invest in education/training, they will more likely have a higher income. Investments are made when the likely return is considered more valuable than the otherwise immediate gratification.

How much to Invest? By comparing the cost of investment and estimated future benefits, businesses can decide how much money to spend on investments. Producer Price Index (PPI) – Maintained by US Gov’t – Measure the cost of raw materials companies use to make our products – PPI tries to determine 2 things from monitoring the changing cost of raw materials … #1 how fast these prices are rising and #2 whether producers are passing this rising cost onto consumers

Input vs. Output Opportunity costs of investment – Not using that money to produce more goods to be sold – The opportunity cost of investment can be found by comparing input and output

Costs of Investment The opportunity cost of investment (lost production) can be found by comparing the ratio of output vs. input. – Input is all of the factors of production that go into making a good. – Output is simply the amount of the good being made. – Ex: You pay $50,000 for a college degree, but you never work a day in your life. What was the input/output? Was that a good investment? – You bought a $25,000 boat that you used every weekend in the summer for 5 years. Was that a good investment?

Law of diminishing returns When the amount of a variable input (input whose amount can change) is added to a fixed input (input that is unchanging) the amount of output decreases … say whaaaat? – Ex: You own a McDonalds. You hire one worker and the number of burgers made goes up by 10 per hour. You hire one more worker and they increase burger output by 11. one more worker adds 12 burgers. However, adding that 4th worker only adds 7 burgers. The grill is getting cramped, people can't move as easily. adding a 5th worker would only add 3 more burgers. People can barely move around the grill. The investment in worker #4 and #5 is no longer that beneficial to you. – # of workers is the variable input (number can change), the grill is the fixed input.

reflection Why do people and businesses make investments? Why would a business invest in capital goods? Why would employers invest in their workers education level? What do businesses use to figure out how much to invest? How do producers find the opportunity cost of investment? Summarize the law of diminishing returns.

Closing? Why do people and businesses make investments?