1. Agenda Review Class Rules Key Terms Article Worksheet Student Videos
Production Possibilities Curve
Production Possibilities Worksheet
HOMEWORK
Review Powerpoint for next class (online)
Read “Current Reading Assignment” (online)

2. Don’t use cellphones during class Comments
Class Rules
Be on time
Pay attention
Be prepared
Don’t use cellphones during class
Comments
You are responsible to monitor your grade
You are responsible to seek help ( is best way to contact me)

3. Being Prepared Do the reading
Assigned
Print and Review the Powerpoint before class

4. Course Overview – Review
Powerpoints introduce the concepts
Lectures explain the concepts
Readings, videos, movies apply the concepts 4

5. Course Overview – Review
Powerpoints introduce the concepts
Lectures explain the concepts
Readings, videos, movies apply the concepts
So if you don’t review and print the powerpoints before class, success is not likely 5

6. Course Overview (cont.)
Lectures explain the concepts
not enough class time to write down all the information contained in the powerpoints 6

7. Absences You are responsible for… Getting the material
Reviewing the Class Presentations (posted on Facebook)
Getting the homework assignment, reading assignment, etc.

8. Absences (continued) Tests…
You need will make-up the test at detention when you return.
You will receive a ZERO if you have not made arrangements and I return the test.
is the best way to make arrangements to take the test.
Extra Credit given to the class is everyone attends class on test day.

9. Additional Class Materials
Multi-Colored pens (or pen)
One inch three ring binder

10. Laptops, kindles, iPads, etc.
Yes, you can use them.

11. Module 1 – What is Economics?

12. Economics is the study of human behavior
Economics is the study of human behavior. How people allocate limited resources to produce goods and services to satisfy unlimited needs and wants.

13. Trade-off vs. Opportunity Cost Entrepreneur
Key terms
Factors of Production
Scarcity vs. shortage
Need vs. want
Good vs. Service
Trade-off vs. Opportunity Cost
Entrepreneur 13

14. Four Factors of Production (resources)
Land
All Natural resources
Example - Oil, Coal, Trees
Labor
People producing a good or service
Example – Auto worker, Lawyer, Teacher
Human Capital
Training for Labor
Example – College Education, Seminars
Physical Capital
Tools used by labor to make goods and services
Example – Computers, Buildings, Factories, desks

15. Definition of Economics…. The study of human behavior
Definition of Economics….The study of human behavior. How people allocate limited resources* to produce goods and services to satisfy unlimited needs and wants.
*The four factors of production are resources that are limited.

16. Scarcity vs. shortage But not necessarily a small amount
Scarcity is permanent
But not necessarily a small amount
Example: Ocean water
Shortage is temporary
But temporary may be days, weeks months or even years 16

17. Need vs. Want Need = gotta have it Want = nice to have it
For each person to decide
Cellphone example
The study of human behavior. How people allocate limited resources to produce goods and services to satisfy unlimited needs and wants. 17

18. Good vs. Service Good Service Tangible
Generally produced with physical skills, physical capital
Examples….a car, a desk, an airplane
Service
Intangible
Generally produced with knowledge, human capital
Examples…Medical services, legal services, education 18

19. Trade-off vs. Opportunity Cost
Trade-off = All the choices given up
Opportunity Cost = Most valuable choice (trade-off) given up
Examples
Your time
Cafeteria
The study of human behavior. How people allocate limited resources to produce goods and services to satisfy unlimited needs and wants.
Because resources are limited, you have to make choices. 19

20. “There is no free lunch.”
There are always trade-offs.

21. Entrepreneur
Uses resources (factors of production) to produce goods and services to satisfy needs and wants 21

22. Entrepreneur
Uses resources (factors of production) to produce goods and services to satisfy needs and wants

23. Entrepreneur
Uses resources (factors of production) to produce goods and services to satisfy needs and wants
Examples
La Salle HS
Jack FM
Bank ATM
Amazon.com 23

24. Quick Review… 1. What is the difference between a shortage and scarcity? (a) A shortage can be temporary or long-term, but scarcity always exists. (b) A shortage results from rising prices; a scarcity results from falling prices. (c) A shortage is a lack of all goods and services; a scarcity concerns a single item. (d) There is no real difference between a shortage and a scarcity Which of the following is an example of using physical capital to save time and money? (a) hiring more workers to do a job (b) building extra space in a factory to simplify production (c) switching from oil to coal to make production cheaper (d) lowering workers’ wages to increase profits 24

25. Article
Search Economic Terms 25

26. Worksheet
Chapter 1, Section 1 26

27. Student videos

28. THREE MINUTE BREAK
Be back when time expires or detention awaits you.

29. Production Possibilities Curve
Graph showing the trade-offs (i.e. possible production outcomes)

30. Production Possibilities Curve
Graph showing the trade-offs (i.e. possible production outcomes). Trade offs is a key concept. More of one good or service, less of the other.
Product (good
or service) B
Product (good or service) A

31. Production Possibilities Curve
Why is the production possibilities curve “bowed out”?

32. Production Possibilities Curve
Why is the production possibilities curve “bowed out”?
ANSWER: The Law of Increasing Opportunity Costs

33. Production Possibilities Curve
Why is the production possibilities curve “bowed out”?
ANSWER: The Law of Increasing Opportunity Costs
As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.

34. Production Possibilities Curve
Why is the production possibilities curve “bowed out”?
ANSWER: The Law of Increasing Opportunity Costs
As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.
WHY you might ask
Example

35. Watermelons (millions of tons) Shoes (millions of pairs)
A production possibilities graph shows the cost of producing an item. To produce the first eight million tons of watermelons cost of 1 million pairs of shoes. The Trade Off (the real cost) of producing the first eight million tons of watermelons (to go from 0 to 8) is the one million tons of watermelons that you give up (going from 15 to 14)
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph 14 18 21 12 9 8
c (14,12)
d (18,9)
Point A
Point B A B
At Point A you can produce 0 watermelons and 15 million pairs of shoes. At Point B
you can produce 8 million tons of watermelons and 14 million pairs of shoes. 35

36. Trade-offs
Why would the entrepreneur choose to produce more watermelons?
What is the cost of that decision?
What is the benefit?
Why does Apple choose to produce more iPads?

37. Watermelons (millions of tons) Shoes (millions of pairs)
What is the cost to produce the first million pair of shoes?
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph 14 18 21 12 9 8
c (14,12)
d (18,9) 37

38. Law of Increasing Costs…Revisited
The Law of Increasing Opportunity Costs - As you produce more of one product (Good or Service A), the cost (opportunity cost) increases.
The cost of first million shoes cost 200,000 tons of watermelons
The cost of the fifteenth million (still one million shoes) cost eight million tons.
THE COST INCREASED

39. Law of Increasing Costs…Continued
Why is that the case?

40. Law of Increasing Costs…Continued
Why is that the case?
Because the entrepreneur uses the best shoe making resources (most productive factors of production) for making shoes first…the worst / least productive last. As such, it requires more resources to produce the last ton.

41. Shoes (millions of pairs) Watermelons (millions of tons)
Efficiency means using resources in such a way as to maximize the production of goods and services. An economy producing output levels on the production possibilities frontier is operating efficiently.
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14) S
g (5,8)
A point of underutilization
Efficient is on the production possibilities curve. Anywhere
on the curve but on the curve.

42. Shoes (millions of pairs) Watermelons (millions of tons)
Growth If more resources become available, or if technology improves, an economy can increase (more stuff) its level of output and grow. When this happens, the entire production possibilities curve “shifts to the right.”
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph T
Future production
Possibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14) S

43. Guns or Butter Phrase used by economists to describe trade-offs.
Military Goods
(guns)
Consumer Goods
(Butter) 43

44. Worksheet, Production Possibilities Curve

45. Homework Questions to consider (i.e. be able to answer)
Print and Review Powerpoint for next class
Two Reading Assignment for next class
“There's No Such Thing As a Free Lunch”
Questions to consider (i.e. be able to answer)
What is the opportunity cost to Adam of failing to start saving at age 18?
What is the opportunity cost to John of saving at age 18? What did he give up? (Hint: there is no single right answer, you have to think “What might John have given up?”)
2. “Pass the Book, Hold the Oil”
Questions to consider
What factor of production is key to Taiwan’s success?
Which factor of production was important....
When Columbus sailed to the new world?
During the period of colonization?
During the industrial revolution?
How does this effect you in 2013?

46. HANDOUTS