1. WHAT IS ECONOMICS?

2. Economics Standard
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.
Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.
Define and give examples of productive resources (factors of production) (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).
List a variety of strategies for allocating scarce resources.
Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.

3. Unit 1: Basic Economic Concepts
I WON THE LOTTERY!
I’ll give you anything you want other than money.
What do you want?
Would your list ever end?
Why not?
Scarcity!!!

4. What is Economics? Economics - the science of scarcity.
Scarcity- we have unlimited wants but limited resources.
Since we are unable to have everything we desire, we must make choices on how we will use our resources.
Economics is the study of choices
In economics we study the choices of individuals, firms and governments

5. Examples:
You must choose between buying jeans or buying shoes.
Businesses must choose how many people to hire.
Governments must choose how much to spend on welfare.

6. WRITE THIS DOWN!!! ECONOMICS: Study of how
people and nations decide to use scarce resources to satisfy unlimited wants and needs.

7. WRITE THIS DOWN TOO: 2 areas of Economics
MICROeconomics-
Study of small economic units such as individuals, firms, and industries (ex: supply and demand in specific markets, production costs, labor markets, etc.)
MACROeconomics-
Study of the large economy as a whole or economic aggregates (ex: economic growth, government spending, inflation, unemployment, international trade etc.)
Copyright
ACDC Leadership 2015

8. Scarcity is a limited amount of resources used to meet unlimited wants and needs.
We cannot have all we want.
Scarcity forces everyone to make decisions and choices.
Every choice has a cost.
Opportunity cost.
Efficiency is getting the most out of scarce resources

9. TWO IMPORTANT WORDS
GOODS
SERVICES

10. Physical objects such as shoes & cars - YOU CAN TOUCH THEM
GOODS
Physical objects such as shoes & cars - YOU CAN TOUCH THEM

11. Work or duties done for others, usually for pay.
SERVICES
Work or duties done for others, usually for pay.

12. An item that we desire but that is not essential to survival
WANT
I NEED FOOD!
I WANT PIZZA!
An item that we desire but that is not essential to survival

13. NEED
An item necessary for survival
Ex: food,shelter,and clothing

14. NEEDS OR WANTS?

15. Scarcity and Choices
..\Scarcity\mjm.Episode 2_ Scarcity and Choice.mp4

16. SHORTAGE VS. SCARCITY
Scarcity = limited amount of resources. Resources are FINITE. It is a naturally occurring phenomenon.
Shortage = temporary or longer lasting. Caused by man.

17. Shortage
Producers will not or cannot offer goods & services at the current prices
A popular item is sold out during the busy holiday season

18. All Resources are Scarce!
This video was made in Did it come true?
Copyright
ACDC Leadership 2015

19. WHAT IS ANOTHER NAME FOR THESE SCARCE RESOURCES?

20. THE FACTORS OF PRODUCTION

21. Resources used to make all goods & services
Factors of production
Resources used to make all goods & services
MUST FILL
NEEDS
AND WANTS

22. The Factors of Production
CAPITAL
LAND
LABOR
ENTREPRENEURSHIP

23. BRAIN BREAK Use the hand that you do NOT write with.
Draw something from the video with that hand that you do NOT write with….

24. LAND
All natural resources used to produce goods & services
Oil, Water, Air. Fields, Forests

25. CATTLE

26. LAND? Iron ore pellets LAND: any natural resource
Gold, Natural gas, Fertile soil, Diamonds, Oil, Water, Air

27. Any and all human effort used to produce goods & services
LABOR
Any and all human effort used to produce goods & services

28. Ex: TEACHER

29. CAPITAL
Any human-made resource used to produce other goods & services
TOOLS

30. CAPITAL
Types of Capital
Physical capital
Human capital

31. HUMAN CAPITAL
Expertise or knowledge that performs labor and produces economic value.
Ex: Engineers, nurses

32. Human capital includes a taxi driver’s knowledge of the streets

33. physical capital includes saws & drills
Human-made objects used to create other goods & services
A woodworker’s
physical capital includes saws & drills

34. BULLDOZERS
Physical
Capital
FACTORIES

35. Advantages of physical capital for example: TECHNOLOGY
Extra time
Increased knowledge
Greater productivity

36. ENTREPRENEURSHIP
Individuals who decide how to combine land, labor, & capital resources to produce new goods & services.
In the economy, they decide how to combine the factors of production to create new goods and services
They take the RISK….

37. Review with your neighbor…
Define Scarcity
Define Economics
Identify the relationship between scarcity and choices
Explain how Macroeconomics is different than Microeconomics
What are the factors of production?
Name 4 Disney movies

38. The Factors of
Production and
Money
(add to your notes)

39. Land - Rent

40. Labor - Wages

41. Capital - Interest

42. Entrepreneurial
Ability
Profit

43. ALLOCATION… REMEMBER THESE?
Supply and demand
Authority
Random Selection
First Come, first served
Personal characteristics
Contest

44. OLD MACDONALD SING-A-LONG
Watch the video and write specific examples of the Factors of Production that Old MacDonald has….

45. Trade-Offs and Opportunity Cost

46. Scarcity means we can’t have everything we want so we must make…
Scarcity means we can’t have everything we want so we must make…..DECISIONS

47. INDIVIDUALS OR

48. BUSINESSES

49. GOVERMENTS OR

50. Why do decisions involve trade-offs?
Resources are limited

51. Individuals, businesses,and governments
Who makes trade-offs?
Individuals, businesses,and governments
Me and …..YOU

52. DECISION-MAKING PROCESS

53. WHEN YOU CHOOSE
ONE THING

54. YOU ARE NOT
CHOOSING SOMETHING
ELSE

55. YOU ARE GIVING SOMETHING UP

56. of the alternatives that we sacrifice when we make a decision
All
of the alternatives that we sacrifice when we make a decision
TRADE-OFFS

57. OPPORTUNITY COST
The SECOND most desirable opportunity given up as the result of a decision

58. What you give up when you make one decision over another is your opportunity cost

59. OPPORTUNITY COST CAN BE A
SPECIFIC MEASUREMENT

60. Always desirable b/c it is 2nd BEST choice
It helps you:
Determine some of the opportunity costs for your decision
Make a better decision
Always desirable b/c it is 2nd BEST choice

61. BRAIN BREAK Write your birth date on the sheet of paper.
At the sound of the bell, line up according to birth dates in the hall.

62. Economics Standard
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.
Illustrate by means of a production possibilities curve the trade offs between two options.
Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.

63. ie Factors of Production
When a country
decides to use
its scarce resources,
ie Factors of Production

64. …it must take away using its resources to make something else
to make one thing…
…it must take away using its resources to make something else

65. It can use its scarce resources to make a combination of both
But not unlimited amounts of both

66. GUNS OR BUTTER
The phrase that refers to the trade-offs that nations face when choosing whether to produce military or consumer goods

67. A GUNS OR BUTTER ISSUE
The government of a country must make a decision between increasing military spending and subsidizing wheat farmers

68. A GUNS OR BUTTER ISSUE
The government of a country must make a decision between spending money on a hospital or spending the same amount on border security

69. Read the passage you picked up on the way in today and answer the following…
What 3 items does Eisenhower cite that are stealing from others?
What 2 groups are being robbed?
Other than money, what 3 things are the world in arms spending?
The cost for a heavy bomber is what 4 things?
What is the cost of a single fighter plane? A single destroyer?
What economic concept(s) is Eisenhower discussing?

70. Guns and Butter
"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.”
“The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement.”
“We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people.”
-Dwight Eisenhower Speaking against the military build up of the cold war 70

71. The USS Dwight Eisenhower
Launched in 1975 and cost $679 million ($4.5 billion in 2007 dollars) 71

72. HOW DOES SCARCITY AFFECT THE CHOICES YOU MAKE?

73. Scarcity - A limited quantity of resources
WE NEED STUFF!
WE WANT STUFF!
We want it ALL video
…to meet unlimited wants & needs

74. What is scarce?...
The Factors of
Production

75. PRODUCTION POSSIBILITIES CURVE
Shows alternate ways to use an economy’s resources

76. Efficiency is getting the most out of scarce resources.
Why is it important?

77. Because the resources used to make all goods and services are scarce (limited)
We must decide to use them in the most efficient way.
Being efficient allows us to get the greatest output and meet the greatest number of unlimited wants and needs possible.

78. GRAPHS

79. Graph:
Offers a way to visually express ideas that might be less clear if described with equations or words

80. Possibilities Curve – draw this
Production
Possibilities Curve – draw this
Monsters

81. How does PPC show efficiency?
Shows maximum amount an economy can produce with its limited resources

82. How is opportunity cost graphically measured?
QUESTION
How is opportunity cost graphically measured?

83. How does PPC illustrate opportunity cost?
Points on curve show alternate ways to use an economy’s resources
When one product is gained,some of another is lost

84. PRODUCTION POSSIBILITIES CURVE
Graph that shows alternate ways to use an economy’s resources
Shows maximum amount an economy can produce with its limited resources
Compares the amount of resources used to produce two goods

85. Categories or specific goods are compared on the horizontal and vertical axes

86. Range of
combinations
Range of choices in the combination of goods or services produced are points plotted on the graph

87. At Point Q, the country uses its resources to make 11 units of food and 5 computers

88. At Point T, the country uses its resources to make 8 units of food and 9 computers

89. Maximum
Output
Line on a production possibilities curve that shows the maximum possible output

90. Line connecting the plotted points is the frontier

91. EFFICIENT:
All resources are being used in production to make the greatest possible number of goods & services

92. EFFICIENCY
An economy working at its most efficient production levels is producing on the production possibilities frontier

93. What does point D represent?
UNDERUTILIZATION/
INEFFICIENCY H L D
What does point D represent?

94. Draw a point on your PPC UNDERUTILIZATION v Food O Clothing
Production inside
the production
possibility curve
Food v O
Clothing

95. POINT X

96. Beyond the frontier is unattainable…At the present.

97. POINT Y

98. EXPANDING THE FRONTIER
PPF2
Food
PPF1 O
Clothing

99. Must add factors of production: labor, technology, etc.

100. Which point is unattainable?D
Which point is unattainable?

101. How to calculate opportunity cost

102. At Point T, how many units of food are being produced?

103. 8

104. At Point T, how many computers are being produced?

105. 9

106. At Point T, what is the opportunity cost of making one additional computer?

107. 3 Units of Food

108. To make 1 additional computer, you have to move from Point T to Point V

109. This would lower your production of food from 8 units to 5 units

110. 3 Units of Food
At Point T, what is the opportunity cost of making one additional computer?

111. 1 Computer
At Point R, what is the opportunity cost of making one additional unit of food?

112. The opportunity cost of a decision can be examined (measured) by using a
DECISION-MAKING GRID
Used to measure the opportunity cost of one decision over another.

113. Rational decision
Weigh cost and benefits of alternatives
Make decision in your best self interest

114. You are weighing
COSTS
versus
BENEFITS

115. YOU HAVE TO BE THE JUDGE OR
SLEEP
MONEY

116. Deciding whether to do or use one additional unit of some resource
THINKING AT THE MARGIN
Deciding whether to do or use one additional unit of some resource
Small, incremental adjustments to a plan of action

117. Compare the costs & benefits
THINKING AT THE MARGIN
Compare the costs & benefits
Decide extra cost or benefit of doing something

118. Decision making grid State the goal
Identify the alternatives you are deciding among
List and rank the criteria you are judging the alternatives by
Cost/Benefit analysis-Weigh the benefits and the costs by evaluating the alternatives according to the criteria
+ if it meats criteria and – if not
Choose based on frequency and placement of the pluses and minuses
Re-evaluate your decision

119. Would you see the movie three times?
Thinking at the Margin
# Times Watching Movie
Benefit
Cost
1st
$30
$10
2nd
$15
3rd $5
Total
$50
Would you see the movie three times?
Notice that the total benefit is more than the total cost but you would NOT watch the movie the 3rd time.

120. Marginal Analysis
In economics the term marginal = additional
Marginal analysis (aka: thinking on the margin) making decisions based on increments
Example:
When you decide to go to the mall you consider the additional benefit and the additional cost (your opportunity cost).
Once you get to the mall, you continue to use marginal analysis when you shop, buy food, and talk to friends.
Since your marginal benefits and costs can quickly change your analyzing them every second.
What if your ex-girlfriend shows up?
The Point: You will continue to do something as long as the marginal benefit is greater than the marginal cost

121. Which flight should you choose? Why?
Given the following assumptions, make a rational choice in your own self-interest (hold everything else constant)…what is Latin term? Ceteris Paribus
1. You want to visit your friend for a week. You will return Sunday night.
2. You work every weekday earning $100 per day
3. You have three flights to choose from:
Thursday Night Flight = $275
Friday Early Morning Flight = $300
Friday Night Flight = $325
Which flight should you choose? Why?