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Low Soo Peng Economics Foundations
1. Unit 1: Foundations ofUnit 1: Foundations of
EconomicsEconomics
What comes to yourWhat comes to your
mind when you hear themind when you hear the
word SCARCE?word SCARCE?
(video about scarcity)(video about scarcity)
2. What is Economics?What is Economics?
““A science that deals with theA science that deals with the
allocation, or use, of scarceallocation, or use, of scarce
resources for the purpose ofresources for the purpose of
fulfilling society’s needs and wants.”fulfilling society’s needs and wants.”
– Addison-Wesley– Addison-Wesley
3. OBJECTIVES 1.1OBJECTIVES 1.1
EXPLAIN why scarcity and choice areEXPLAIN why scarcity and choice are
basic problems of economicsbasic problems of economics
IDENTIFY land, labor, and capital as theIDENTIFY land, labor, and capital as the
three factors of production, and identifythree factors of production, and identify
the two types of capitalthe two types of capital
EXPLAIN the role of entrepreneursEXPLAIN the role of entrepreneurs
EXPLAIN why economists say allEXPLAIN why economists say all
resources are scarceresources are scarce
4. What is Economics?What is Economics?
So then the big two concepts areSo then the big two concepts are
that:that:
Resources are scarce!Resources are scarce!
Society has unlimited needs andSociety has unlimited needs and
wants!wants!
Economics decides the “best” way ofEconomics decides the “best” way of
providing one to the otherproviding one to the other
6. ScarcityScarcity
DefinitionDefinition
A situation in which the amountA situation in which the amount
of something actually availableof something actually available
would not be sufficient to satisfywould not be sufficient to satisfy
the desire for it, if it werethe desire for it, if it were
provided free of charge.provided free of charge.
7. …… MORE VOCABULARYMORE VOCABULARY
ShortageShortage
Factors of ProductionFactors of Production
LandLand
LaborLabor
CapitalCapital
Physical CapitalPhysical Capital
Human CapitalHuman Capital
8. Factors of ProductionFactors of Production
There are 4 factors that must all beThere are 4 factors that must all be
used to produce anythingused to produce anything
Natural Resources (also referred toNatural Resources (also referred to
as “land”)as “land”)
9. Factors of ProductionFactors of Production
There are 4 factors that must all beThere are 4 factors that must all be
used to produce anythingused to produce anything
Labor – effort of a person for whichLabor – effort of a person for which
they are paidthey are paid
10. Factors of ProductionFactors of Production
There are 4 factors that must all beThere are 4 factors that must all be
used to produce anythingused to produce anything
Capital – human-made resourcesCapital – human-made resources
used to create other goodsused to create other goods
11. Factors of ProductionFactors of Production
3 Kinds of Capital3 Kinds of Capital
Physical Capital – Also calledPhysical Capital – Also called
Capital GoodsCapital Goods, objects that are, objects that are
used to produce other goodsused to produce other goods
12. Factors of ProductionFactors of Production
3 Kinds of Capital3 Kinds of Capital
Human Capital – knowledge orHuman Capital – knowledge or
skills workers get from educationskills workers get from education
and experienceand experience
13. Factors of ProductionFactors of Production
There are 4 factors that must all beThere are 4 factors that must all be
used to produce anythingused to produce anything
Entrepreneurship – person whoEntrepreneurship – person who
takes a risk in combining the othertakes a risk in combining the other
3 factors to create a new good3 factors to create a new good
15. FACTORS of PRODUCTIONFACTORS of PRODUCTION
Example of FRENCH FRIES … page 6Example of FRENCH FRIES … page 6
IN N OUTIN N OUT
16. Making Economic DecisionsMaking Economic Decisions
Every decision we make involvesEvery decision we make involves
trade-offs –trade-offs – alternatives that wealternatives that we
must give up when we make amust give up when we make a
choicechoice
Example – “I could stay up for 3Example – “I could stay up for 3
hours playing Halo, study, or sleep.”hours playing Halo, study, or sleep.”
17. PROFILE – Gary Becker!PROFILE – Gary Becker!
Read p. 7 about Gary
Becker’s thoughts about
the “marriage market”…
hmmm… Then discuss
with neighbor:
1. Do you agree or
disagree that economics
guides even life’s most
personal decisions???
18. 1.1 QUIZ – get a partner!1.1 QUIZ – get a partner!
Number your paper 1 - 6Number your paper 1 - 6
1. Which of the following are factors of1. Which of the following are factors of
production?production?
a. Capital and Landa. Capital and Land
b. Scarcity and shortagesb. Scarcity and shortages
c. Technology and productivityc. Technology and productivity
d. economics and business decisionsd. economics and business decisions
20. Next question …Next question …
2. Which of the following is an example of2. Which of the following is an example of
using physical capital to save time andusing physical capital to save time and
money?money?
a. hiring more workers to do a job?a. hiring more workers to do a job?
b. building extra space in a factory to simplifyb. building extra space in a factory to simplify
productionproduction
c. switching from oil to coal to makec. switching from oil to coal to make
production cheaperproduction cheaper
d. lowering workers’ wages to increase profitsd. lowering workers’ wages to increase profits
21. Answer is …Answer is …
b. building extra space in a factory tob. building extra space in a factory to
simplify productionsimplify production
22. next question …next question …
3. To what part of an industry does a3. To what part of an industry does a
worker’s education contribute?worker’s education contribute?
a. technologya. technology
b. physical capitalb. physical capital
c. human capitalc. human capital
d. scarce resourcesd. scarce resources
24. next question …next question …
4. Which of the following is an4. Which of the following is an
entrepreneur?entrepreneur?
a. a person who earns a lot of money as aa. a person who earns a lot of money as a
singer or dancersinger or dancer
b. a person who creates a game and sells itb. a person who creates a game and sells it
to a game manufacturerto a game manufacturer
c. a person who starts an all-organic cleaningc. a person who starts an all-organic cleaning
supplies business that employs otherssupplies business that employs others
d. a person who works as a highly paidd. a person who works as a highly paid
computer programmercomputer programmer
25. Answer is …Answer is …
c. a person who starts an all-organicc. a person who starts an all-organic
cleaning supplies business that employscleaning supplies business that employs
othersothers
26. Next …Next …
5. What is the difference between a5. What is the difference between a
shortage and scarcity?shortage and scarcity?
a. A shortage can be temporary or long-term,a. A shortage can be temporary or long-term,
but scarcity always exists.but scarcity always exists.
b. A shortage results from rising prices;b. A shortage results from rising prices;
scarcity results from falling prices.scarcity results from falling prices.
c. A shortage is a lack of all goods andc. A shortage is a lack of all goods and
services; scarcity concerns a single item.services; scarcity concerns a single item.
d. There is no real difference between ad. There is no real difference between a
shortage and scarcityshortage and scarcity
27. answer …answer …
a. A shortage can be temporary or long-a. A shortage can be temporary or long-
term, but scarcity always exists!term, but scarcity always exists!
28. next….next….
6. What does an economist mean by the6. What does an economist mean by the
term LAND?term LAND?
a. farmland onlya. farmland only
b. food crops grown on farmland as well asb. food crops grown on farmland as well as
the farmland itselfthe farmland itself
c. goods and services that are produced formc. goods and services that are produced form
the landthe land
d. all natural resources used to produced. all natural resources used to produce
goods and servicesgoods and services
29. answer …answer …
d. all natural resources used to produced. all natural resources used to produce
goods and services!goods and services!