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Econ Ch1 Scarcity And Choice

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Econ Ch1 Scarcity And Choice

  1. 1. Chapter SCARCITY & CHOICE 1
  2. 2. Chapter Objectives <ul><li>Students will learn: </li></ul><ul><li>What scarcity is and why it is central to economics. </li></ul><ul><li>The four factors of production and will analyze their role in the creation of goods and services. </li></ul><ul><li>Discover that many things we do actually involve making economic choices. </li></ul><ul><li>Recognize when economic decisions are being made, and understand some of the factors that go into making those choices. </li></ul>
  3. 3. WHAT I$ ECONOMIC$? Economics=Choice <ul><li>Scarcity </li></ul><ul><li>Choice </li></ul><ul><li>Wants </li></ul><ul><li>Needs </li></ul><ul><li>Trade-Off </li></ul><ul><li>Opportunity Cost </li></ul>
  4. 4. Value and Scarcity <ul><li>Scarcity =the basic economic problem </li></ul><ul><li>Resources = stuff people make things with </li></ul><ul><li>Scarce =has value & short supply </li></ul><ul><li>Example: </li></ul><ul><li>Gasoline vs. Sand? </li></ul>
  5. 5. Making Choices <ul><li>Trade-off: choosing one thing over another </li></ul><ul><li>Opportunity Cost: cost of choosing one thing over another; you give up the next best option. </li></ul>
  6. 6. Decision Making Grid <ul><li>Enjoy more sleep </li></ul><ul><li>Have more energy during the day </li></ul><ul><li>Better grade on the test </li></ul><ul><li>Teacher and parent approval </li></ul><ul><li>Personal satisfaction </li></ul>Benefits Forgone Extra sleep time Extra study time Opportunity Cost Wake up early to study for test Sleep late Decisions <ul><li>Better grade on the test </li></ul><ul><li>Teacher and parent approval </li></ul><ul><li>Personal satisfaction </li></ul><ul><li>Enjoy more sleep </li></ul><ul><li>Have more energy during the day </li></ul>Benefits Wake up early to study Sleep late Alternatives
  7. 7. Decision Making at the Margin 3 hours of sleep Grade of B+ on test 3 rd hour of extra study time 2 hours of sleep Grade of B on test 2 nd hour of extra study time 1 hour of sleep Grade of C on test 1 st hour of extra study time Opportunity Cost Benefits Options
  8. 8. Wants & Needs <ul><li>Wants </li></ul><ul><li>Everything else. </li></ul><ul><ul><li>Fashion </li></ul></ul><ul><ul><li>Entertainment </li></ul></ul><ul><ul><li>Motorized Transportation </li></ul></ul><ul><li>Needs </li></ul><ul><li>Things that keep us alive </li></ul><ul><ul><li>Food </li></ul></ul><ul><ul><li>Water </li></ul></ul><ul><ul><li>Shelter </li></ul></ul><ul><li>Necessities </li></ul><ul><ul><li>Things start out as wants and end up needs </li></ul></ul><ul><ul><ul><li>Electricity </li></ul></ul></ul><ul><ul><ul><li>Indoor plumbing </li></ul></ul></ul><ul><ul><ul><li>Telephone </li></ul></ul></ul>Question: Can you think of examples of other wants or needs?
  9. 9. Factors of Production <ul><li>Natural resources </li></ul><ul><li>Human resources </li></ul><ul><li>Capital resources </li></ul><ul><ul><li>Capital boosts productivity </li></ul></ul><ul><ul><li>Goal=few resources, most production </li></ul></ul><ul><li>Entrepreneurship </li></ul>“ What is wealth?”
  10. 10. Informed Decisions <ul><li>Maximize: get the most from our choices </li></ul><ul><li>Facts: verifiable, objective , measurable </li></ul><ul><li>Opinions: value, subjective , immeasurable </li></ul>
  11. 11. Weighing Costs and Benefits <ul><li>Model =simplified view, graph, helps understand real world (more complicated) </li></ul><ul><li>Production possibilities curve = helps maximize productivity </li></ul><ul><li>Applying Models to Real Life </li></ul><ul><ul><ul><li>simplistic </li></ul></ul></ul><ul><ul><ul><li>not all factors </li></ul></ul></ul><ul><ul><ul><li>clear picture of opportunity cost nothing more </li></ul></ul></ul>
  12. 12. Opportunity Cost: Production Possibilities Curve Mowing lawn=1 hour Trimming Bushes=2 hours

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