Scarcity and the Science of Economics<br />“We witness scarcity with each year’s “hot” new product.”<br />What is Economic...
Fundamental Economic Problem<br />Scarcity: Condition where unlimited human wants face limited resources.<br />Effects alm...
The study of how people try to satisfy wants with scarce resources.<br />Economics<br />Economics is about scarce resource...
Needs and Wants<br />Need: Required for survival.<br /><ul><li>Want: Desired for satisfaction.</li></li></ul><li>“No such ...
Three Basic Questions<br />What To Produce: A society must choose based on its needs.<br />How To Produce: Society must ch...
Land: Limited natural resources not created by humans (climate, fresh water, vegetation, minerals, animals)<br />Capital: ...
Labor: Workers who apply their efforts, abilities, and skills to production.<br />Entrepreneur: Risk-takers who combine th...
When all the factors of production are present, PRODUCTION, or the process of creating goods and services, takes place.<br...
Describes economic activity- Gross Domestic Product (GDP), unemployment rate, government spending, tax rates…<br />Analyze...
Economists offer an explanation of the economy and its activities to the society’s population. <br />Prediction: We want t...
Basic Economic Concepts <br />“20% of the world’s people who live in the wealthiest nations consume 86% of the world’s goo...
Goods: Item that is economically useful or satisfies an economic want.<br />Consumer good: Intended for final use by indiv...
Services: Work that is performed for someone and intangible.<br />Consumers: A Person who uses goods and services to satis...
Value: A worth that can be expressed in dollars and cents.<br />Scarcity by itself is not enough to create value.  For som...
Utility: Provide satisfaction, which varies with the needs and wants of each person.<br />Utility<br />
Wealth<br />The accumulation of goods that are tangible, scarce, useful, and transferable from one person to another.<br /...
Adam Smith’s 1776 book, The Wealth of Nations, referred specifically to the ability and skills of a nation’s people as a s...
The Circular Flow of Economic Activity<br />Wealth that is generated by the economy is made possible by a circular flow of...
The Market<br />Factor Markets<br />Individual’s earned income<br />Focus on the four factors of production: land, labor, ...
Circular Flow Chart<br />
Productivity<br />Measure of the amount of output produced by a given amount of input within a certain time<br />Productiv...
Specialization and Division of Labor<br />May improve productivity because they lead to more proficiency (and greater econ...
Economic Growth: Depends on high productivity<br />An economy’s productivity may be affected by…<br />
Economic Interdependence<br />We rely on others, and others rely on us, to provide the goods and services that we consume....
Section 3: Economic Choices and Decision Making<br />“Catch a man a fish, and you can sell it to him. Teach a man to fish,...
Trade-Offs<br />Alternative Choices when making economic decisions<br />Decision-making grid lists the adv./disadv of each...
Opportunity Cost<br />The cost of the next best alternative among a person’s choices.<br />The cost may be the money, time...
Production Possibilities Frontier<br />Diagram illustrating the concept of opportunity cost.<br />It shows the various com...
Horizontal Line (X-axis): 100 % annual Butter ProductionVertical Line (Y-axis): 100% annual Gun Production<br />50 units o...
Production Possibilities continued<br />Opportunity Costs: Expressed in terms of trade-offs, or in terms of things given u...
Build simple models to analyze or describe actual economic situations.<br />Employ Cost-Benefit Analysis: Compare the cost...
Studying economics will help us know how the economy works on a daily basis.<br />Helps us understand the Free Enterprise ...
Helps us become better decision-makers, both in our personal and professional lives AND at the voting booth!!<br />Economi...
Every time a choice is made, something is given up!<br />Rational choice is taking the things with greater value and givin...
What is economics unit1week1
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Fundamentals of Economics

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What is economics unit1week1

  1. 1. Scarcity and the Science of Economics<br />“We witness scarcity with each year’s “hot” new product.”<br />What is Economics?<br />
  2. 2. Fundamental Economic Problem<br />Scarcity: Condition where unlimited human wants face limited resources.<br />Effects almost every decision we make.<br />
  3. 3. The study of how people try to satisfy wants with scarce resources.<br />Economics<br />Economics is about scarce resources, consumption and production. How many "economic elements" can you identify in the picture above?<br />
  4. 4. Needs and Wants<br />Need: Required for survival.<br /><ul><li>Want: Desired for satisfaction.</li></li></ul><li>“No such thing as a free lunch”<br />Because resources are limited, virtually everything we do has a cost.<br />Someone has to pay for production<br />“TINSTAAFL”<br />Why do you think scarcity is an issue with the rich as well as the poor?<br />
  5. 5. Three Basic Questions<br />What To Produce: A society must choose based on its needs.<br />How To Produce: Society must choose based on its resources.<br />For Whom to Produce: Society must choose based on its population and other available markets.<br />
  6. 6. Land: Limited natural resources not created by humans (climate, fresh water, vegetation, minerals, animals)<br />Capital: Means by which something is produced (money, tools, equipment, machinery, and factories).<br />Factors of Production<br />
  7. 7. Labor: Workers who apply their efforts, abilities, and skills to production.<br />Entrepreneur: Risk-takers who combine the land, labor, and capital into new products.<br />Factors of Production, continued<br />
  8. 8. When all the factors of production are present, PRODUCTION, or the process of creating goods and services, takes place.<br />Production<br />
  9. 9. Describes economic activity- Gross Domestic Product (GDP), unemployment rate, government spending, tax rates…<br />Analyzes economic activity and answers the “why’s” and “how’s”-why prices go up and down, or how do taxes affect savings.<br />The Scope of Economics<br />
  10. 10. Economists offer an explanation of the economy and its activities to the society’s population. <br />Prediction: We want to know what’s around the corner to better prepare ourselves for the unknown.<br />Will prices rise or fall?<br />Will income increase or decrease?<br />Economics is a social science because it looks at the decisions people make and how they react to those decisions.<br />The Scope of Economics, continued<br />
  11. 11. Basic Economic Concepts <br />“20% of the world’s people who live in the wealthiest nations consume 86% of the world’s goods and services. The 20% who live in the poorest nations consume only 1.3%”<br />Section 2<br />
  12. 12. Goods: Item that is economically useful or satisfies an economic want.<br />Consumer good: Intended for final use by individuals<br />Capital goods: Manufactured goods which are used to produce other goods and services. Ex.?<br />Durable goods: Any product that lasts longer than 3 years when used on a regular basis. Ex?<br />Nondurable goods: Any product that lasts less than 3 years when used on a regular basis. Ex?<br />Goods, Services, Consumers<br />
  13. 13. Services: Work that is performed for someone and intangible.<br />Consumers: A Person who uses goods and services to satisfy wants and needs.<br />Why do you think the U.S. has been described as a “society of consumption”?<br />Goods, Services, Consumers<br />
  14. 14. Value: A worth that can be expressed in dollars and cents.<br />Scarcity by itself is not enough to create value. For something to have value, it must also have utility.<br />Value, Utility, and Wealth<br />
  15. 15. Utility: Provide satisfaction, which varies with the needs and wants of each person.<br />Utility<br />
  16. 16. Wealth<br />The accumulation of goods that are tangible, scarce, useful, and transferable from one person to another.<br />A nation’s wealth is comprised of all items, including natural resources, factories, etc.<br />Does not include services!!<br />
  17. 17. Adam Smith’s 1776 book, The Wealth of Nations, referred specifically to the ability and skills of a nation’s people as a source of its wealth.<br />Advocated a free market economy as more productive and more beneficial to society. Comments? Criticisms?<br />Wealth, continued<br />
  18. 18. The Circular Flow of Economic Activity<br />Wealth that is generated by the economy is made possible by a circular flow of economic activity.<br />
  19. 19. The Market<br />Factor Markets<br />Individual’s earned income<br />Focus on the four factors of production: land, labor, capital, entrepreneurship<br />Product Markets<br />Individual’s spending place<br />Focus on goods and services<br />
  20. 20. Circular Flow Chart<br />
  21. 21. Productivity<br />Measure of the amount of output produced by a given amount of input within a certain time<br />Productivity increases with efficient use of scarce resources.<br />
  22. 22. Specialization and Division of Labor<br />May improve productivity because they lead to more proficiency (and greater economic interdependence)<br />
  23. 23. Economic Growth: Depends on high productivity<br />An economy’s productivity may be affected by…<br />
  24. 24. Economic Interdependence<br />We rely on others, and others rely on us, to provide the goods and services that we consume.<br />
  25. 25. Section 3: Economic Choices and Decision Making<br />“Catch a man a fish, and you can sell it to him. Teach a man to fish, and you ruin a wonderful business opportunity.”<br />
  26. 26. Trade-Offs<br />Alternative Choices when making economic decisions<br />Decision-making grid lists the adv./disadv of each choice.<br />
  27. 27. Opportunity Cost<br />The cost of the next best alternative among a person’s choices.<br />The cost may be the money, time or resources a person gives up, or sacrifices, to make his/her final choice.<br />Discussion Question:<br />What are some important economic decisions you will be facing within the next 5 weeks? 5 months? One year? Five years?<br />
  28. 28. Production Possibilities Frontier<br />Diagram illustrating the concept of opportunity cost.<br />It shows the various combinations of goods and/or services an economy can produce when all productive resources are fully employed.<br />Identifying possible alternatives allows an economy to examine how it can best put its limited resources into production.<br />Considering different ways to fully employ its resources allows an economy to analyze the combination of goods/services that lead to maximum output.<br />
  29. 29. Horizontal Line (X-axis): 100 % annual Butter ProductionVertical Line (Y-axis): 100% annual Gun Production<br />50 units of butter will only cost 30 units of guns<br />120 units of guns will cost 50 units of butter<br />Between pts A & B exists a near equal trade-off, which means a competition for resources<br />
  30. 30. Production Possibilities continued<br />Opportunity Costs: Expressed in terms of trade-offs, or in terms of things given up to get something else<br />The Cost of idle resources: If some resources are not employed, it is difficult for any company, nation, or individual to reach its true potential<br />Economic Growth: Any increase in resources and/or productivity causes the production possibilities frontier to move outward<br />
  31. 31. Build simple models to analyze or describe actual economic situations.<br />Employ Cost-Benefit Analysis: Compare the cost of an action to the benefits received (Ex. ?)<br />Baby Steps: Make decisions by taking small, incremental steps toward the final goal<br />Thinking Like an Economist:Strategies that will help us make the best choices<br />
  32. 32. Studying economics will help us know how the economy works on a daily basis.<br />Helps us understand the Free Enterprise economy where consumers and privately owned businesses, not the government, make a majority of the economic decisions. <br />The Road Ahead<br />
  33. 33. Helps us become better decision-makers, both in our personal and professional lives AND at the voting booth!!<br />Economics for Citizens<br />
  34. 34. Every time a choice is made, something is given up!<br />Rational choice is taking the things with greater value and giving up those with lesser value<br />On an individual level, the choices are not so difficult…<br />On the societal level, the choices may not be so easy to make…<br />Making the Rational Choice<br />

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