1. Scarcity and the Factors of the Production
California Content Standards , , and

2. Economics
Is the study of how people seek to satisfy their needs and wants by making choices.
What is a need?
Air, food, water, or shelter is a need
What is a want?
A desired item that is not essential

3. Unlimited Wants & Needs
Humans will never be satisfied and will always want or need more; will never be satisfied

4. Limited Resources There is a limited quantity of resources available
Examples?
Oil (gas)
Water
Coal
Wood
Money (unless you are Bill Gates or Warren Buffet)

5. Scarcity Is the fundamental Problem of Economics
Condition resulting from Society not having enough resources to satisfy its unlimited wants and needs.

6. Allocation
We must choose which of our wants and needs to satisfy with our limited resources.

7. Trade-Offs
Alternative that must be given up when choosing one thing over another.
Time with friends over family
Money for clothes over food
Homework over Television

8. Opportunity Cost Value of what you could have had instead.
Savings for college, instead of a car
A better relationship with family, instead of friends
An “A” in Economics, instead of…

9. Opportunity Benefit
What is gained by choosing one alternative over another.
Saved money for retirement
Spent money no retirement

10. Three Basic Questions of Economics
What to produce?
Scarce resources
Societies must decide
How to produce?
What we decide to produce?
For whom to produce?

11. What to Produce? Societies must decide what is essential Essential
Shelter & Food
Modern Societies face additional considerations
National Defense
Education
Public Health

12. How to Produce? Use of Equipment over people? Electricity
Agriculture - Tractors or workers
Industrial – Machines or workers on an assembly line
Electricity
Oil? Solar Power? Nuclear Power? Water Power?
What will determine factors of production?
Land, Labor, Capital
Goods and services

13. How to Produce?
One acre of land + 56 worker hours + simple hand tools = 15 bushels of wheat
One acre of land worker hours + Mechanical farming equipment = 40 bushels of wheat
What is a bushel of wheat?
One bushel of wheat = one million kernels and can yield 60 pounds of whole wheat flour

14. Whom to Produce?
Societies decide how to distribute goods through their economies
Farmer makes a decision
Produce too much lower prices, too little not enough supply
Who would you produce for?
Rich, poor, both, women, men
Who does Ferrari, Gucci, Burberry produce for? Why?

15. Economic Systems How a society answers the three questions Command
Traditional
Mixed Economy
Market

16. Command (Communism) All economic decisions made by the government.
Production
Health care
Jobs
North Korea (Kim Jong-il
Cuba (Raul Castro)

17. Traditional Customs, Habits, Rituals
Little room for innovation or change
Defined roles (boys follow fathers, girls their mothers)
Agriculture and hunting practices are key
Not a stable economy against the effects of environmental disasters

18. Mixed Economy
Combines individual choice with government regulation and spending
Individuals can own businesses, government regulates policies
United States
Canada
Germany
Sweden

19. Mixed Economy Sweden’s Opportunity Benefit Opportunity Cost
Government redistributes more than half of Sweden’s wealth through social programs
Parents are entitled to 450 days of parental leave
Patients rarely pay more than 1,800 kronor ($230) per year for prescriptions
Employers are required to give a minimum of 30 days vacation
Opportunity Cost
Second highest tax burden of any industrialized country.
56 percent of what they make to taxes; 32 percent in the U.S.

20. Market Individuals and Businesses act in their own best interests
No Government Involvement (Laissez-Faire)
Let the market correct itself
Hong Kong
Virtually no barriers on foreign trade
Banks operate independently from the government