1. Scarcity, Choices and Economic Growth
Mr. Rosenstock
Economics
San Fernando High School

3. Scarcity Needs vs. Wants
The fundamental problem facing all societies is that of Scarcity
Scarcity is the condition of not having enough resources to produce all the things people would like to have
Scarcity leads to choices
Needs vs. Wants
Needs: Basic requirements for survival like food, clothing and shelter
Wants: Are the way of expressing a need (like wanting pizza to express the need for food)

4. Choices WHAT to produce?
With limited resources, what should society produce?
Where should production go to: food, housing, clothing etc?

5. HOW to produce?
Should we keep more workers employed and use less machines
or, should we use more machines (mass production/automation) and hire less workers?

6. for WHOM to produce?
After the first two questions are solved, society needs to decide for whom to produce
Who are the intended buyers of the goods we produce: the average middle class person, the wealthy, women, children, men, etc.?

7. There Is No Such Thing As A Free Lunch!
Concept that nothing is truly free
In a market economy everything has a cost
Sellers expect profit
from what they sell
Workers must be paid
for their labor
Cost of materials to
manufacture good

8. Why are some countries rich and others poor
Why are some countries rich and others poor? (low, middle and high income)

10. Gross Domestic Product: the total value of goods produced and services provided in a country during one year
1750

11. Population Growth and Important World Events
1750
Note that 1750 is beginning of industrial revolution and productivity takes off.
~1750

12. The Industrial Revolution
Industrial revolution was a change in manufacturing and
transportation that began with fewer things being made by hand
but instead made using machines in large-scale factories
Began around 1750 in England and lasted until about 1840
Caused massive economic and social changes:
More goods were produced
Populations increased dramatically
Large scale migration as people moved from rural farms and towns
to cities in search of work and opportunities

13. Economic Growth: A positive change in the level of production of goods and services by a country over a period of time
Marginal Propensity to Save: the proportion of each additional dollar of disposable income that is to save (instead of consume)

14. Benefits & Side Effects of Economic Growth
1. Increased consumption
Consumers can benefit from consuming more goods and services
Consumption is related to utility
Higher levels of consumption often means there is greater prosperity
2. Improved public services
With increased tax revenues the government can spend more on important public services such as health and education
Improved health care improves quality of life by treating diseases and increasing life expectancy
Increased educational standards can give the population a greater variety of skills and literacy
Increased income is related to better education
This enables greater opportunity and freedom
Education is an important determinant of welfare and happiness

15. 3. Reduced unemployment and poverty
Economic Growth helps to reduce unemployment by creating jobs
This is significant because unemployment is a major source of social problems such as crime, poverty and alienation
Lifting people out of absolute poverty allows them to afford the basic necessities of life such as food, and shelter
When this happens there is a clear link with improved standard of living

16. Standard of living: The level of wealth, comfort, material goods
and necessities available to a certain socioeconomic class

17. Economic growth is like having a bigger pie
Economic growth is like having a bigger pie. And a bigger pie leads to larger slices (though not equal for everyone…)

18. 2. Pollution and Global Warming
Side Effects:
1. Diminishing returns
As economic growth increases incomes, people (the wealthy) increasingly save their money (higher marginal propensity to save) this is because they struggle to find anything meaningful to spend their money on
Once basic needs and wants are met, incentive to save increases
Money that is saved means there is less tax revenue for the government
2. Pollution and Global Warming
Economic Growth causes external side effects such as increased pollution and global warming
Global warming from pollution is becoming an existential problem for all societies

19. 3. Economic growth can cause increased inequality
Those who benefit most from growth are the highly educated and the wealthy
Lack of reinvestment of wealth into economy stagnates wellbeing and growth of lower and middle classes
4. Increase in crime and social problems
A paradox is that as incomes increase and people are better off the level of crime has increased
Paradox: a seemingly absurd or self-contradictory statement or idea that proves true with investigation
Inequality is associated with increased crime and social problems

20. 5. Higher economic growth has led to more hours worked
In the beginning of the Industrial Revolution, higher growth led to people working lower hours
Since around 1980 higher growth has led to people working longer hours
Since around 1980 more and more women have been joining the workforce to help earn money
Wages have not kept up with inflation
Inflation: a general increase in prices and fall in the purchasing power of money
Corporations/business owners demand more hours/productivity from workers at the same rate of pay (or lower) than before
Profit driven
In recent times, the desire for increased productivity and profits has lead to employers to demand longer working hours from employees

21. Increasing number of employers shift production to automation/robots
Initial cost of automation offset by not having to pay wages and benefits (health/retirement) to employees
6. Diseases of affluence
Economic Growth has improved health care, but at the same time there has been a rise in the number of diseases and illnesses related to increased prosperity
An example is obesity and diabetes. Modern lifestyles and modern diets have created an epidemic of obesity and diabetes