1. FUNDAMENTALS OF ECONOMICS

2. (TOPIC 1)LEARNING OBJECTIVES Explain why scarcity & choice are the basis of economics in every society Describe the 3 economic factors of production Identify why every decision involves trade-offs Explain the concept of opportunity cost Describe how people make decisions by thinking at the margin

3. SCARCITY Economics: The study how people seek to satisfy their needs & wants by making choices.

4. SCARCITY MEANS MAKING CHOICES Unlimited wants, limited resources Scarcity does NOT mean shortage https://www.pearsonrealize.com/com munity/program/d23f696c-58d8-3512- b201-60055f184497/10/tier/1f587f5f- d37a-3c9e-9674- 299bea7942fa/1/lesson/2c43e957-2f01- 3db7-b65e- 170c210b17e4/1/content/b7e415a4- e020-3f89-971f-d766e57f044a/1

5. Entrepreneurs : people who decided how to combine resources to create new goods & services Factors of Production Land Labor Capital Physical Human

7. TRADE-OFF Act of giving up one benefit in order to gain another, greater benefit Football or school play? Part time job or volunteer work? Vacation or new car? College or job? Grow broccoli or squash? Make chairs or tables? New roads or education?

8. GUNS OR BUTTER Governments face trade-offs Guns (military goods) Butter (consumer goods)

12. 1.2 OPPORTUNITY COST & TRADE-OFFS In most trade-off situations, one of the rejected alternatives is more desirable than the rest. The most desirable alternative somebody gives up as the result of a decisions is the opportunity cos.

13. OPPORTUNITY COST The most desirable alternative somebody gives up as the result of a decision

14. OPPORTUNITY COST Go to bed early or stay up studying Go to bed early or go to a party Go to bed early or stay up watching Netflix Your opportunity cost is…

16. m

17. CHECK POINT Someone gives up going to see a movie to study for a test in order to get a good grade. The opportunity cost is ____________ Jill decides to drive to work instead of taking the bus. It takes her 90 minutes to get there and the bus ride would have been 40, so her opportunity cost is ________ David decides to quit working and go to school to get further training. The opportunity cost is __________

18. Deciding how much more or less to do THINKING AT THE MARGIN When making decisions, economists look at opportunity cost & thinking at the margin. Marginal = Additional When you add one more additional unit, how much benefit will you get?

19. MARGINAL COST/MARGINAL BENEFIT To make a sensible decision, weigh the marginal cost v the marginal benefit If MB is > MC, then go for it Extra cost of adding one additional unit Extra benefit of adding the same unit

20. Look at the marginal cost of each extra hour of studying & compare it to the marginal benefit.

21. Make your own Decision Making at the Margin chart

22. (1.3) PRODUCTION POSSIBILITIES CURVES Objectives: Interpret a PPC Explain how PPC show efficiency, growth, & opportunity cost Explain why a country’s production possibilities depend on its resources & technology

23. In economics you need to decide how to use resources most efficiently A farmer needs to decide what to grow & how much.

24. PRODUCTION POSSIBILITIES CURVE

25. To decide what and how much to produce, economists use a PPC

26. The line, Production Possibilities Frontier, shows the different combinations possible Any spot on the line represents an economy working at its most efficient level

27. The line, Production Possibilities Frontier, shows the different combinations possible Any spot on the line represents an economy working at its most efficient level

28. Underutilization: the use of fewer resources than the economy is capable of using Any spot on the line represents an economy working at its most efficient level

29. OPPORTUNITY COST

30. A-B: 20 B-C: 60 C-D: 100 D Law of Increasing Opportunity Costs: Trade-offs get more & more expensive

31. GROWTH A PPC is a snapshot In the real world, resources are constantly changing If quantity or quality of land, labor, or capital changes, the curve will move

32. GROWTH A PPC is a snapshot In the real world, resources are constantly changing If quantity or quality of land, labor, or capital changes, the curve will move Growth examples: more immigration, new natural resources found, better technology

33. Curve shifts left when production capacity decreases.

34. Decrease in supplies, loss of land during war, natural disaster

35. GROWTH If there is an increase in resources available for one product, then the PPF may shift at just one end.