2. Lunch Activity
Activity: each person has $10.00
$1.00 – slice of pizza
$.75 – pop
$.50 – water bottle
$1.75 – cheeseburger
$1.00 – ice cream cone
$.50 - fruit cup
$.25 – apple
$2.50 – salad
$.50 – bag of chips
$.50 – milk
$.25 – cheese stick
$1.75 – turkey sandwich
3. SCARCITY & THE FACTORS OF
PRODUCTION
SECTION 1 – HOW CAN WE MAKE THE BEST ECONOMIC CHOICES?
4. Scarcity & Choice
• Need – something essential for survival
• Want – something that people desire but that
is not necessary for survival
• Goods – physical objects that someone
produces
• Services – actions or activities that one person
performs for another
5. Scarcity & Choice (continued)
• Problem of limits
– Scarcity – principle that limited amounts of goods
& services are available to meet unlimited wants
• Scarcity versus shortage
– Shortage – situation in which consumers want
more of a good or service that producers are
willing to make available at a particular price
6. What is economics?
• The study of how people seek to satisfy their
needs & wants by making choices
8. Entrepreneurs & the Factors of
Production
• Entrepreneurs – person who decides how to
combine resources to create goods & services
• Factors of Production – resources that are
used to make goods & services
9. Factors of Production
• Land – all natural resources used to produce
goods & services
• Labor – effort people devote to tasks for
which they are paid
• Capital – human-made resource that is used
to produce other goods & services
10. CAPITAL
• Physical Capital – human-made objects used
to create other goods & services
• Human Capital – knowledge & skills a worker
gains through education & experience
14. Trade-Offs (continued)
• Act of giving up one benefit in order to gain
another greater benefit
Individual Level
Example:
Business Level
Example:
15. Trade-Offs (continued)
• Gov’t Level
– Guns & butter – idea that a country that decides
to produce more military goods (guns) has fewer
resources to produce consumer goods (butter)
16. Determining Opportunity Cost
• O.C. – most desirable alternative given up as
the result of a decision
Decision-Making Grid
Alternatives
Alternative 1 Alternative 2
Benefits of
choosing your
alternative
Benefits forgone
(given up) of
choosing the
alternative
Opportunity Cost
17. Economist thought on Opportunity Cost
Choosing
is
REFUSING
QUESTION
“Is choosing not to say something the same as agreeing with what is being done?”
18. Thinking at the Margin
• Process of deciding whether to do or use one
additional unit of some resource
• Cost/benefit analysis – decision-making
process in which you compare what you will
sacrifice and gain by a specific action
• Marginal Cost – extra cost of adding one unit
• Marginal Benefit – extra benefit of adding one
unit
19. Decision-Making at the Margin
Options Benefit Opportunity Cost
1st hr of extra study time Grade of C on test 1 hr of sleep
2nd hr of extra study time Grade of B on test 2 hrs of sleep
3rd hr of extra study time Grade of B+ on test 3 hrs of sleep
21. Production Possibilities
• Production Possibilities
Curve – graph that shows
alternatives ways to use an
economy’s productive
resources
• Production Possibilities
Frontier – line on a
production possibilities
curve that shows the
maximum possible output
an economy can produce
Frontier
23. Steps to creating your own curve &
chart
• Step 1: choose what to EXAMINE
24. Steps to creating your own curve &
chart (continued)
• Step 2: Figure out the MAXIMUM amount for
each product
25. Steps to creating your own curve &
chart (continued)
• Step 3: Start figuring out the opportunity costs
by creating a possibilities chart
Possibilities
27. Efficiency, Growth, & Cost
• Efficiency – use of resources in such a way as
to maximize the output of goods & services
– Underutilization – use of fewer resources than an
economy is capable of using
Efficiency
Underutilization
29. Efficiency, Growth, & Cost (continued)
• Cost
– Law of increasing costs – economic principle
states that as production shifts from making one
good or service to another, more and more
resources are needed to increase production of
the second good or service
32. Kitchen Challenge
• Objective: Raise the most money for the food
bank
• Breakfast must include:
– Main course
– Fruit
– Drink
• Budget: $500
• Time: 2 hours
Editor's Notes
Explain how the book works?
Scarcity activityFactors of production activity
Scarcity – defines how we make decisions – limited resources also helps us define our decisionsGood – food, clothingService – medical care, haircuts
Explain twinkie shortage- $2.99 to $62.99 – box of 20 – cardPiece of card board shaped like a twinkie - $200.00Scarcity – amount of moneyShortage – amount being produced
Activity: each person has $10.00$1.00 – slice of pizza$.75 – pop$.50 – water bottle$1.75 – cheeseburger$1.00 – ice cream cone$.50 - fruit cup$.25 – apple $2.50 – salad$.50 – bag of chips$.50 – milk$.25 – cheese stick$1.75 – turkey sandwichObjective -
Live like no one today, so you can live like no one tomorrow
Land – oil, iron, coal, water, & forestsLabor – medical care, classroom instruction, assembly-line work, technician Capital - Scavenger hunt to find factors of production – return fast as you can - farmer
Human capital – soup – chunks of types of stuff
Factors of production – scavenger huntFactors of production – land, labor, capital games
Ask for examples1 decision they have already made todayLand, labor, capital – factors of production
Iran, Canada, India, N. Korea,What is more powerful – no guns or everyone has guns
Psychologically, we make a decision-making grid in our mind – how many search the best price out?Sleeping in or getting up early to study for a testWhat has more value or gratificationFarmer example – squash v broccoli – how would he determine his crop for that year
Business perspectiveDo I hire more people or do I make due with what I haveDo I invest or do I put my money towards a house paymentDo I spend more time with my friends or do I study Apple – stop making computers and evolve only into hand held devices such as ipads, phones, etc.
What is the opportunity cost of 1 hr of extra study timeWhat point is an added cost with little added benefit?
Review what an economist doesAlso, explain that businesses use a p.p.c. to determine how much to sell Individuals use this curve everyday.
Used to analyze choices & trade-offs that people makeStep 1: choose what to examineStep 2: Figure out the maximum amount for each productStep 3: Start figuring out the opportunity costs by creating a possibilities chart
Sumo wrestlers – real estate agents – drug dealers living with their moms to the disappearance of over 6 million children in 1985Teaches economics – sold over 6 million books – made a movie
Show diagram
Growth or decrease – more immigrants, expansion of land, advanced technologyShow diagramGDP = all factors of productions – total worth
To an economist, cost means opportunity costDef – more resources will be used to produce one item over the other resulting in more opportunity cost
Economist determines which goods & services a country can produce with its current resources – technology pictures from appleFactors of production – also include level of technology - 3rd world country may have a million people but little technologyApple – blackholeMicrosoft tableResearch one inventor who has transformed technology
