1. Economics “The art of making the most of life” Economics is MAKING CHOICES!!!

2. Economics The study of how people seek to satisfy their needs and wants by making choices The study of how people seek to satisfy their needs and wants by making choices

3. Scarcity Limited quantities of resources to meet unlimited wants Limited quantities of resources to meet unlimited wants All things are scarce

4. Goods – physical objects such as shoes and shirts Goods – physical objects such as shoes and shirts Services – actions or activities that one person performs for another Services – actions or activities that one person performs for another

6. Scarcity creates a problem!

7. Scarcity

8. Economics is about solving the problem of scarcity!

9. Shortage A producer cannot offer goods or services at the current prices.

10. Shortage=Scarcity

11. Factors of Production: Land (Natural Resources), Labor, and Capital are essential to producing all goods and services!

12. Land The part of a product that is made up of something that comes from the earth. Renewable Resources can be made again Renewable Resources can be made again Non-renewable Resources can be used only once. Non-renewable Resources can be used only once.

13. Labor The part of a product that involves someone doing something to it. Physical labor means physically doing something to make a product. Physical labor means physically doing something to make a product. Mental Labor working with your mind to help produce a product. Mental Labor working with your mind to help produce a product.

14. Specialization Training someone to do one thing in order to enhance productivity. Training someone to do one thing in order to enhance productivity.

15. Capital The tools used to create a product. Physical capital are things made my people, like buildings and tools. Physical capital are things made my people, like buildings and tools. Human capital refers to the knowledge and skills people gain from study and experience. Human capital refers to the knowledge and skills people gain from study and experience.

16. Entrepreneurs Ambitious leaders who decide how to combine land, labor, and capital to create new goods and services. Ambitious leaders who decide how to combine land, labor, and capital to create new goods and services.

17. What factors are involved in Making shoes?

18. Opportunity Cost

19. Trade-Offs An alternative that we give up whenever we make a decision An alternative that we give up whenever we make a decision

20. Governments Opportunity Costs Guns and Butter Guns and Butter The more you pay for welfare, the less you have for the military The more you pay for welfare, the less you have for the military The more you pay for military, the more people you leave to go hungry. The more you pay for military, the more people you leave to go hungry.

21. What are some trade-off of:  buying a car?  eating lots of candy?  not brushing your teeth?  hiring more employees?  spending more money on the war?

22. Opportunity Cost In your own words…what is opportunity cost?

23. Opportunity Cost In your own words…what is opportunity cost?

24. Opportunity Cost Most desirable alternative given up Most desirable alternative given up By making a choice you don’t get to partake in the benefits of the next best alternative By making a choice you don’t get to partake in the benefits of the next best alternative

25. Opportunity Cost Write these down on your paper. Gum, Snickers, Chips, Donuts, Beef Jerky Rank your top two choices. 1. _________2. _________ Your opportunity cost is your 2nd choice. What did you give up for choosing your first choice? Snickers (chocolate and caramel)

26. Opportunity cost Sleep LateWake up/Study Benefits More sleep More energy Better Grade Satisfied Props from… Decision Sleep Late Wake Up Early Opp. Cost Wake up/study Sleep Late

27. Thinking at the Margin – trying to minimize the opportunity cost of a decision – trying to minimize the opportunity cost of a decision Deciding how much more or less to do Deciding how much more or less to do a decision is made at the margin when each alternative considers cost and benefit ranked in progressive units. a decision is made at the margin when each alternative considers cost and benefit ranked in progressive units. No more units should be added once the opportunity cost outweighs the benefit No more units should be added once the opportunity cost outweighs the benefit

28. Example: Robinson Crusoe Robinson Crusoe is stranded on an island. Based on his available resources and the time he has each day, he can make a certain amount of pineapple juice and a certain amount of coconut juice. Create a chart that shows the production of both pineapple and coconut juice.

29. Label the point on your graph where he makes 25 quarts of coconut milk point ALabel the point on your graph where he makes 25 quarts of coconut milk point A Label the point where he makes 20 quarts of pineapple juice point B.Label the point where he makes 20 quarts of pineapple juice point B.

30. Key PPC

31. What are the opportunity costs of each of these points?What are the opportunity costs of each of these points? Label the point where he produces 15 quarts of milk and 10 quarts of juice point C.Label the point where he produces 15 quarts of milk and 10 quarts of juice point C.

32. Robinson Crusoe’s PPC

33. What could cause point C? This is called underutilization.What could cause point C? This is called underutilization. Where is the point of maximum efficiency? (Frontier)Where is the point of maximum efficiency? (Frontier) PP Frontier – A line on PPc that shows the max possible output PP Frontier – A line on PPc that shows the max possible output Illustrates scarcity Illustrates scarcity Efficiency’ Efficiency’ Underutilization Underutilization Growth Growth

34. Key PPC

35. Production Possibilities Curve – A graph that shows alternative ways to use an economy’s resources. – A graph that shows alternative ways to use an economy’s resources. PP Curve/Graph tells us three things PP Curve/Graph tells us three things How efficient an economy is How efficient an economy is How economy has grown or shrunk How economy has grown or shrunk Opportunity cost of a decision Opportunity cost of a decision