1. Econ Essentials #6
Scarcity

2. What do you do with your money?

3. The Economic Problem!
We have limited resources, but unlimited wants
This is scarcity

4. Thus, We must allocate (distribute) our resources effectively AND SO,
We have to make choices or trade-offs

5. The Economic Questions!
What to produce?
If resources are limited, what do we choose to use them for?
If many new students move into the area, should we build another school or expand this one?

6. 2. How to Produce? How do we make products?
If building a house, do you buy new machines or hire more workers to make the product?
Why might they hire more workers instead of buying new equipment?

7. 3. For whom to produce? Who do we allocate our limited resources to?
Should we spend more money on schools or jails?

8. Is water a scarce resource?

9. According to the United Nations, every day 4,500 children under the age of 5 die around the world, having fallen sick because of unclean water and sanitation.
Five times as many children die each year of diarrhea as of HIV/AIDS.
A third of the world’s population is enduring some form of water scarcity.
One in every six human beings has no access to clean water within a kilometer of their homes.

10. Econ Ess. #7: Opportunity Cost
Quick Review (Copy, if you want to!!)
Which of the following is a service?
Concert
Hot dog
Computer
Which of the following is a natural resource?
Hammer
Gold
Cash

11. More Review…. Which of the following best describes scarcity?
Having more than enough to satisfy one’s wants and needs.
Not having enough to satisfy one’s wants and needs.
Having just enough to satisfy one’s wants and needs.

12. The Road Not Travelled
When we choose one thing, we loose another – called Opportunity Cost – value of the next best alternative you must pass up (lost opportunity)

13. But,
How do you know what you have missed out on?

14. Calculating the Cost The Opp. Cost varies with the situation
Value of your time on a Wed night vs. Sat night
Make the best choice with limited information
When your parents say, if I had only known…..

15. Sunk Cost: resources spent, that can’t be recovered
Time is the ultimate
limitation / limited resource
Sunk Cost: resources spent, that can’t be recovered
Do you walk out halfway through a bad movie?
Economists would say …..

16. Making Economic Decisions
Cost-benefit analysis: compare costs with benefits and make best decision

17. So, what about college?
List all the things you have to pay for to attend a four year college.

18. College Costs @ UCLA Tuition - $8,851 / At CSULB: $4,026
Health Insurance - $885
Room & Board - $13,314
Transportation - $909
Living Expenses - $1,551
Total Cost - $27,109

19. More Cost
Besides the financial costs, what else will it cost you to go to college?

20. What are the benefits?

21. What’s the opportunity cost for attending a 4 year school
What’s the opportunity cost for attending a 4 year school? (What’s the next best alternative?)

22. Is it worth it?