2. WHAT IS ECONOMICS?
•So then the big two concepts are
that:
•Resources are scarce!
•Society has unlimited needs and
wants!
Economics decides the “best” way of
providing one to the other
7. FACTORS OF PRODUCTION
•There are 4 factors that must all be
used to produce anything
•1) Natural Resources (also referred
to as “land”)
8. FACTORS OF PRODUCTION
•There are 4 factors that must all be
used to produce anything
•2) Labor – effort of a person for
which they are paid
9. FACTORS OF PRODUCTION
•There are 4 factors that must all be
used to produce anything
•3) Capital – human-made resources
used to create other goods
10. FACTORS OF PRODUCTION
• A) Physical Capital – Also called
Capital Goods, objects that are
used to produce other goods
11. FACTORS OF PRODUCTION
• B) Human Capital – knowledge or
skills workers get from education
and experience
12. FACTORS OF PRODUCTION
• There are 4 factors that must all be used
to produce anything
• 4) Entrepreneurship – person who
takes a risk in combining the other 3
factors to create a new good
14. 1.1 QUIZ – GET A PARTNER!
NUMBER YOUR PAPER 1 - 6
• 1. Which of the following are factors of production?
• a. Capital and Land
• b. Scarcity and shortages
• c. Technology and productivity
• d. economics and business decisions
16. NEXT QUESTION …
• 2. Which of the following is an example of using physical
capital to save time and money?
• a. hiring more workers to do a job?
• b. building extra space in a factory to simplify production
• c. switching from oil to coal to make production cheaper
• d. lowering workers’ wages to increase profits
17. ANSWER IS …
• b. building extra space in a factory to simplify production
18. NEXT QUESTION …
• 3. To what part of an industry does a worker’s education
contribute?
• a. technology
• b. physical capital
• c. human capital
• d. scarce resources
20. NEXT QUESTION …
• 4. Which of the following is an entrepreneur?
• a. a person who earns a lot of money as a singer or dancer
• b. a person who creates a game and sells it to a game
manufacturer
• c. a person who starts an all-organic cleaning supplies business
that employs others
• d. a person who works as a highly paid computer programmer
21. ANSWER IS …
• c. a person who starts an all-organic cleaning supplies
business that employs others
22. NEXT …
• 5. What is the difference between a shortage and
scarcity?
• a. A shortage can be temporary or long-term, but scarcity always
exists.
• b. A shortage results from rising prices; scarcity results from
falling prices.
• c. A shortage is a lack of all goods and services; scarcity
concerns a single item.
• d. There is no real difference between a shortage and scarcity
23. ANSWER …
• a. A shortage can be temporary or long-term, but
scarcity always exists!
24. NEXT….
• 6. What does an economist mean by the term LAND?
• a. farmland only
• b. food crops grown on farmland as well as the farmland itself
• c. goods and services that are produced form the land
• d. all natural resources used to produce goods and services
25. ANSWER …
• d. all natural resources used to produce goods and
services!
26. FIVE APPEALING VACATION
DESTINATIONS…
Hawaii Paris
Dunns River Falls,
Jamaica
Alaska
Ireland
What is your first choice?
What is your second
choice?
Section 1.2 – Opportunity Cost
27. MAKING ECONOMIC DECISIONS
•The most desirable of the options you
pass up is called the Opportunity
Cost
•Rank sleep, studying, and playing
video games 1st, 2nd, and 3rd on a list
for what you value the most
28. MAKING ECONOMIC DECISIONS
•Every decision we make involves
trade-offs – alternatives that we
must give up when we make a
choice
•Example – “I could stay up for 3
hours playing Halo, study, or sleep.”
29. MAKING ECONOMIC DECISIONS
•1st Place is what
you would
choose to do
•2nd Place is your
opportunity cost
(you give it up to
do option 1)
30. MAKING ECONOMIC DECISIONS
•What other option do you have other
than using 3 hours for one task?
•You could split your time among
multiple activities!
•Thinking at the Margin – decision
involving adding one unit and
subtracting one unit, rather than all or
nothing
31. MAKING ECONOMIC DECISIONS
Options Benefit Opportunity Cost
0 hours studying,
3 hours sleeping
F on Test None
1 hours studying,
2 hours sleeping
C on Test 1 hour of sleep
2 hours studying,
1 hour sleeping
B on Test 2 hours of sleep
3 hours studying B+ on Test 3 hours of sleep
32. MAKING ECONOMIC DECISIONS
•There is a point at which you are
paying the same increase in cost, but
seeing lower benefits
•You must make the decision as to
whether the cost is worth it
•This same process is used by
businesses and consumers to make
decisions
33. QUIZ TIME…
• 1. If a person who wants to buy a compact disc (CD)
has just enough money to buy one, and chooses CD A
instead of CD B, then CD B is the
• a. trade-off
• b. opportunity cost
• c. decision at the margin
• d. opportunity at the margin
35. NEXT…
• 2. A decision-making grid is a visual way of:
• a. examining opportunity costs
• b. selling goods or services
• c. making marginal decisions
• d. identifying shortages
37. NEXT …
• 3. A decision is made at the margin when each
alternative considers
• a. a different trade-off than the others
• b. where the most costly alternative will be.
• c. what the “all or nothing” alternative will be.
• d. cost and benefit ranked in progressive units.
38. ANSWER …
• c. d. cost and benefit ranked in progressive units
39. GRAPHS….
• WHY do graphs sometimes show information more
clearly than text or tables?
Section 1.3 – Production Possibilities Curves
42. PRODUCTION POSSIBILITIES
•Production Possibilities Graph –
shows alternatives to what an
economy can produce
•The outer red line shows the
maximum possible output with any
given combination
•This is the Production Possibilities
Frontier (or Curve)
44. PRODUCTION POSSIBILITIES
•Any point along the line shows the
economy operating at maximum
efficiency
•Any point below the line is
underutilization – they are not getting
all that they could
•Any point above the line is presently
impossible, until new resources are
available
45. PRODUCTION POSSIBILITIES
•Why does the graph curve instead of
making a straight line?
•Law of Increasing Costs – as
production increases for one item,
more and more resources are
necessary to increase production of
the second item! The
OPPORTUNITY COST increases…
46. PRODUCTION POSSIBILITIES
•Every resource is best suited for
certain types of goods
• Farmland and cows make butter
• Metals and factories make guns and
many times you hear about butter vs.
guns due to military spending on
weaponry using resources …
• To convert butter production to guns, you
must sell the cows and build new
factories on the land
47. QUIZ TIME …
• 1. The economic concept of guns or butter
means that …
• a. a person can spend extra money either on sports
equipment or food.
• b. a company must decide whether to manufacture
guns or butter
• c. a government must decide whether to produce
more or less military or consumer goods
• d. a government can buy unlimited military and civilian
goods if it is rich enough
48. ANSWER …
• c. a government must decide whether to produce more
or less military or consumer goods … trade off …. due
to scarcity!
49.
• 2. A production possibilities curve shows the relationship
between the production of:
• a. farm goods and factory goods
• b. two types of farm goods
• c. two types of factory goods
• d. any two categories of goods
51. NEXT …
• 3. The line on a production possibilities curve showing
the relative amounts of two types of goods produced
using all resources is called the
• a. production possibilities frontier
• b. opportunity cost line
• c. utilization of resources
• d. maximum possible production line
53. QUESTION …
• 4. The law of increasing costs means that as
production shifts from one item to another,
•
• a. the cost of production gets cheaper and cheaper.
• b. the cost of producing an item stays the same no
matter how many are produced.
• c. more and more resources are necessary to
increase production of the second item
• d. the land costs of increasing production rise much
more steeply than do the labor costs
54. ANSWER IS …
• c. more and more resources are necessary to increase
production of the second item
55. AND LAST QUESTION …
• 5. The curve usually seen in a production possibilities
frontier can be explained by:
• a. growth in the economy
• b. underutilization of resources
• c. increasing an economy’s efficiency
• d. the law of increasing costs
