Unit I Econ


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Unit I Econ

  1. 1. Unit I Economic Fundamentals How to think like an Economist!
  2. 2. You Can’t Always Get What You Want… “And you can’t always get what you want, Honey, you can’t always get what you want You can’t always get what you want But if you try sometime, yeah, You just might find you get what you need!” -Mick Jagger and Keith Richards 1969
  3. 3. Simply stated, this chorus explains why everyone has to make choices… Essential Question Why can’t you always get what you want? We will explore this question in Unit I…
  4. 4. What is Economics? • The study of how people allocate their limited resources to satisfy their unlimited wants. • The study of how people make “choices”.
  5. 5. Why is it a Social Science? • It deals with the behavior of people as they cope with the fundamental problem of scarcity.
  6. 6. What does Economics deal with? • Describing economic activity • Analyzing economic activity • Explaining economic activity • Predicting economic activity What do you think each of these questions means?
  7. 7. Why is what we want scarce? • Scarcity: the fundamental economic problem facing all societies. Why does this condition arise? • Wants > Resources • Goods and services are scarce because the resources needed to produce them are scarce! Everything is Scarce!
  9. 9. Activity Scarcity Pictograms • Pictogram: a symbolic representation of a word that shows its meaning • Create a pictogram to illustrate your interpretation / definition of each of the following terms: - Wants - Goods - Needs - Scarcity
  10. 10. WANT S
  11. 11. RECAP – “Scarcity” • Scarcity occurs when the limited ingredients (resources) for producing things that people want are insufficient to satisfy all wants. • Take the production of “cookies”. – The ingredients needed to produce cookies are “limited”. » sugar, flour, M&Ms, the baker (that’s me)
  12. 12. Why is what we want scarce? Look around the classroom… 1. List 3 goods that you see in the classroom and 2 services that exist in this school. 2. Explain why these goods/services are scarce. How did the goods/services get here?
  13. 13. Essential Question: These Nothing goods/services How do we satisfy appears were produced to our economic magically… satisfy our wants… wants? Factors of Production • Provide the means for a society to produce and distribute goods and services.
  14. 14. Exit Ticket • How has scarcity affected your life? • What did you do in result of it?
  15. 15. Warm-up: Factors of Production Which factor of production is each of the following? 1. Trees in a forest 6. Rocks 2. Cook in a restaurant 7. Lumber sitting at Home Depot 3. Tractor used to plow fields 8. Iron ore 4. Ice cream store owner 9. Fish in the ocean 5. Money used to buy new 10. Economics teacher at CB East Nike sneakers
  16. 16. Three Basic Economic Questions 1. What to produce? 2. How to produce? 3. For whom to produce? 3 Q’s are answered in order to make decisions about the ways limited sources will be used.
  17. 17. Answering the 3 basic economic questions in a Market Economy [i.e., U.S.]  What to produce?  What should we devote our resources to?  How to produce?  What methods should be used in production?  What is most efficient?  For whom to produce?  Who can afford the product?
  18. 18. Trade-offs  Trade-offs exist because we cannot have everything we want.  Choices must be made to satisfy our wants and needs.
  19. 19. Examples…  Some choices are easy to make… Hmm…  Should I have pizza or a hoagie for lunch today?  Other decisions are agonizing… Should I get out of bed and go to  school today or should I sleep in?
  20. 20. Personal Trade-offs…  If you were given $50.00, what would you do with it?  Each choice in a trade-off has advantages and disadvantages…
  21. 21. Reflecting on Personal Trade-offs… Write down three [3] examples of trade-offs you made in the last week… Be prepared to share!
  22. 22. Opportunity Cost  When comparing the top 2 choices, it is the BENEFIT of the next best alternative that must be sacrificed to satisfy a want.  Not all possible things given up. The best thing we give up to get what we want.
  23. 23. Why it Matters Understanding the opportunity costs of different choices in life makes you a better decision-maker! You always have to give something up…
  24. 24. Visualizing the Relationship… Limited Resources & Unlimited Wants Scarcity Trade-offs (choices) Opportunity Costs
  25. 25. Decision Making Grid: Purchasing „Halo 3‟ Video Game  Using a decision making grid forces you to consider the costs and benefits of each alternative… Delivery Transaction Delivery Price Cost Time Time Online 7 minutes to 49.95 $0 5 minutes download Store $3.00 1 week for Catalog 42.95 10 minutes (shipping) shipping Walmart $4.00 35.95 1+ hour None (gas money) Store 1. What is the opportunity cost of buying at Walmart? 2. What is the opportunity cost of buying online?
  26. 26. Considering the Opportunity Cost of Personal Trade-offs… Pick one of your three trade-offs… What was the opportunity cost? Be prepared to share!
  27. 27. Exit Ticket In your own words, explain the concept ‘opportunity cost’.
  28. 28. Warm-Up ECONOMICS IS EVERYWHERE! 1. Take out your photograph 2. Switch photographs with the person next to you. 3. Identify examples of goods and services in the photograph. Time: 3 min 4. Based on the list you created in question 2, classify each good/service as an example of the factors of production. [land, labor, capital] Time: 3 min 5. According to the photograph, how might scarcity affect daily life?  What are some of the opportunity costs of your daily decisions?
  29. 29. Reviewing key concepts from yesterday… What is the opportunity cost that arises from each of the following trade-offs?  I packed my lunch all week so I had money to go out to dinner on Friday.  I went to work on Thursday night to earn money rather than studying for a test I had on Friday.  I did not go to the movies with my friends so I would have money to buy gas.  I turned down an offer to Princeton [on full scholarship] so I could go to Penn State University …located in the happiest valley in the world!
  31. 31. Measuring Opportunity Cost Graphically… Production Possibility Frontiers Production Possibility Frontier [PPF]:  Represents all possible combinations of total output that could be produced when all resources are fully employed and used efficiently. Why is the PPF curve downward sloping?  Trade-offs By We are always making a choice “resources”,  and giving something up we mean the 4 Factors of Production
  32. 32. Example…  Imagine that you have $5 and there are 2 things you really want to buy: chocolate and ice cream…
  33. 33. Example… Prices: What you give up ------------------ What you get Chocolate Bar $0.50 Ice Cream Cone $1.00 1. How many chocolate bars can you buy instead of one ice cream cone? 2. How many ice cream cones can you buy instead of one chocolate bar?
  34. 34. BOWED-OUT PPFs Varying O.C. Principle of Increasing Costs: As a society produces more of one product, the O.C. of producing that product increases because we are using more resources that are poorly suited to produce it.
  35. 35. STRAIGHT-LINE PPFs Constant O.C. Food O.C. between 1 and 2 computers = 1 food unit 4 O.C. between 3 and 4 3 computers = 1 food unit 2 1 1 2 3 4 Computer CONSTANT OPPORTUNITY COST
  36. 36. Corn vs. Beads Combination Corn Beads A 160 0 Given a set B 80 20 amount C 40 30 of resources D 0 40 (scarcity!), 1. What is the O.C. of going from C to D? the more beads made, 2. What is the O.C. of going from D to A? the less corn made. 3. What is the O.C. of 1 corn? 4. What is the O.C. of 1 bead?
  37. 37. Now…Construct a PPF Combination Corn Beads A 160 0 Given a set B 80 20 amount C 40 30 of resources D 0 40 (scarcity!), 1. Construct a PPF using the above information. the more beads made, 2. Put corn on the x-axis. the less corn 3. Put beads on the y-axis. made. 4. Label all points!
  38. 38. Productivity What makes productivity increase? Productivity increases when more output can be produced with the same amount of inputs. Efficiently using all four factors of production will lead to greater productivity…
  39. 39. Three Ways to Increase Productivity 1. Specialization  Productive inputs specialize in the task they do best 2. Division of Labor  Workers perform fewer tasks more frequently PRACTICE MAKES PERFECT! 
  40. 40. Three Ways to Increase Productivity 3. Investment in Human Capital  Sum of all skills, abilities, health, and motivation of people  Examples – training, healthcare, motivational programs “It is what you would be left with if someone stripped away all of your assets and left you on a street corner with only the clothes on your back”
  41. 41. Problem Set # 1  A society can make either guns or butter  Put guns on the x-axis and butter on the y-axis  Label the following points: Point Guns Butter A 5 3 B 3 9 C 1 15 X 2 9 Y 3 12
  42. 42. Problem Set # 2  A society can make either Jeeps (x-axis) or Cars (y-axis)  If the economy makes 100 cars, it can‟t make any jeeps  If the economy makes 200 jeeps, it can‟t make any cars
  43. 43. Problem Set #3 - Exploring the Essential Question  Imagine that a new society, Paternoville, produces only two items: Footballs and Peachy Paterno Ice Cream.  Use the information on the table below to construct a Production Possibilities Frontier with Footballs on the x- axis and Peachy Paterno Ice Cream on the y-axis. 1. If the economy is currently producing 90 Peachy Paterno footballs, what is the opportunity cost of Footballs Ice Cream producing 10 additional footballs? (gallons) 2. What is the opportunity cost of increasing 100 0 the annual output of Peachy Paterno Ice Cream from 8 to 12 gallons? 90 4 3. If there were a labor shortage or some other event that effects production, where 75 8 would the output of Paternoville production appear on the graph? 50 12 4. What would happen to Paternoville‟s PPF 0 16 if a technological advancement improved production across the board?
  44. 44. Exit Ticket How do you spend your free time? On average, rank order the following choices from 1 – 7, with 1 being the activity you spend the most time on, and 7 being the activity you spend the least time on each week. Student clubs or groups Partying Watching TV Studying/Homework Exercise or sports Working for Pay Socializing with Friends
  45. 45. Economic Interdependence  What does „interdependence‟ mean?  Economic Interdependence: the actions of one part of the country (world) has an impact on what happens elsewhere
  46. 46. Understanding how all parts fit together Circular Flow of Economic Activity  Represents a market economy 2 main “markets”  Product Market: Factor Market:   where goods and services where the 4 factors of are bought and sold production are bought/sold  Shows interdependence between businesses and individuals
  47. 47. Human Circular Flow Model…
  48. 48. Circular Flow of Economic Activity Goods & Goods & Services Services Product Money Money Market Business Individuals Circular Flow Firms Households of Economic Activity Money Money Factor Market Factors of Factors of Production Production
  49. 49. Type Description Strengths Weaknesses Traditional Command Market
  50. 50. A day in the life of… The Task  Imagine that you are a person in one of the economies below. Working with a partner, you will use what you‟ve learned about the characteristics, strengths and weaknesses of this economic system to write a journal entry as this person.  You will then compare this to how you spend your time as a person living in a market economy. The Economic System (choose one) Command or Traditional
  51. 51.  Scenarios You may choose one [1] of the following two [2] writing prompts, and respond in 6-8 sentences  A Typical Day: describe a typical day as a person in your  chosen economy What is your daily routine? ▪ How do you secure your basic needs?  What are you thinking about? ▪ Who do you spend time with?  What is your attitude toward the work you are doing?   A Special Occasion: describe a special occasion as a person in your chosen economy. Where do you go? ▪ What do you do on a special occasion?  Think about the economy‟s assumptions about nature, work, and the meaning of  life. Do any of these features influence the type of celebrations that occur on a special occasion?  The Market Economy and You! d Your final task is to briefly describe how you spend your day typically or on a special occasion.
  52. 52. The type of economic system chosen __/1  Length: an entry that responds to one of the two prompts in 6-8 sent __/2  Meets Requirements: responds to at least three of the focus questions __/6  Illustration: create an illustration that reflects life in this type of economy __/3  Brief description of how you spend your time __/4  Illustration: create an illustration that reflects life in a market economy __/2  Neat and creative presentation of all necessary requirements __/1  Works well with partner __/1   Total __/20
  53. 53. Warm-up: Circular Flow of Economic Activity 1 4 2 2 Circular Flow 7 5 of Economic Activity 6 3
  54. 54. Who do you think owns the businesses shown in this picture? How is the local economy affected when competitors open up near these local businesses?
  55. 55. Exploring “Isms”: Capitalism What is capitalism?  A system in which private citizens own the factors of production What is competition?  A struggle among sellers to attract consumers while lowering costs Buyers compete Capitalism Sellers compete to find the best thrives on for the most products at the competition buyers lowest price
  56. 56. What is a „free enterprise‟ economy? Another term to describe the American Economic system Competition is allowed to flourish with a minimum of government interference * The U.S. is ‘mixed’ because some government regulation / interference does exist
  57. 57. Entrepreneur Consumer Government • Organizes and manages • Determine what • Protector land, labor, and capital products are ultimately • Enforces laws that in order to seek profits produced protect consumers, workers, and businesses • Both the “spark plug” • Their decisions often and the catalyst of the are the power of the • Provider/Consumer free enterprise economy economy…why? • Provides defense services, education, and • When successfully, public welfare everyone • Consumes goods and benefits...how? services at all levels • Regulator • Promoter of National Goals • Reflects the will of a majority of its citizens Essential Question: How should the U.S. government carry out its economic roles?
  58. 58. What characteristic of a Free Enterprise Economy does this cartoon reflect?
  59. 59. Don‟t even think about touching the candy…
  60. 60. Economic decision-making…  Consider the game we just played…  What two types of “economic systems” were simulated?  Who answers the three basic economic questions in a command economy?  Who answers the three basic economic questions in a market economy? Let’s look more closely at the symbolism reflected in the game…
  61. 61. Closure: Rock, Paper, Scissors Activity Symbolizes Action/Object Candy Money Random Distribution of Candy What you are born with. Rock, Paper, Scissors Work/Free Enterprise Collection of Candy Government What happens in a free enterprise Kids who didn’t play by the rules society; can be illegal and corrupt Redistribution of Candy (wealth) Communist Theory Questions for Discussion 1. If you had a lot of candy before we started, how did you feel? 2. If you lost all your candy, how did you feel? 3. How did you feel about me collecting your candy if you were ‘rich’? 4. How did you feel about me collecting your candy if you were ‘poor’?