Period 1 (Aug. 14), Period 2 (Aug 14), Period 4 (Aug 15)

Agenda
 Review Class Rules
 Review Key Terms
 Homework
 Article
 Worksheet
 Student Video
 Lecture – Production Possibilities Curve
 Production Possibilities Worksheet
 Introduction to Chapter 2
 HOMEWORK
Read Chapter 2, Q. 1 – 6
Review Powerpoint for next class (online)
Read “Current Reading Assignment” (online)
Cycle 1, Day 1

Class Rules
Be on time
Pay attention
Be prepared
Don’t use cellphones
• Comments
• You are responsible to monitor your grade
• You are responsible to seek help (e-mail is best
way to contact me)

Absences
You are responsible for…
• Getting the material
• Reviewing the Class Presentations (posted on
my faculty webpage)
• Getting the homework assignment, reading
assignment, etc.

Absences (continued)
Tests…
You need will make-up the test at detention when you
return.
You will receive a ZERO if you have not made
arrangements and I return the test.
E-mail is the best way to make arrangements to take the
test.

Additional Class Materials
Multi-Colored pens (or pen)
One inch three ring binder

Laptops, kindles, iPads, etc.
Yes, you can use them.

Economics is….
The study of human behavior. How people
allocate limited resources to produce goods
and services to satisfy unlimited needs and
wants.
Remember…resources are always scarce, always limited

Four Factors of Production (resources)
1. Land
 All Natural resources
Example - Oil, Coal, Trees
2. Labor
 People producing a good or service
Example – Auto worker, Lawyer, Teacher
3. Human Capital
• Training for Labor
Example – College Education, Seminars
4. Physical Capital
 Tools used by labor to make goods and services
Example – Computers, Buildings, Factories, desks

Key terms
Scarcity vs. shortage
Need vs. want
Good vs. Service
Trade-off vs. Opportunity Cost
Entrepreneur

Scarcity vs. shortage
Scarcity is permanent
Shortage is temporary
Temporary may be days, weeks months or even years

Need vs. Want
Need = gotta have it
Want = nice to have it
For each person to decide
Cellphone example

Good vs. Service
Good
• Tangible
• Generally produced with physical skills
• Examples….a car, a desk, an airplane
Service
• Intangible
• Generally produced with knowledge
• Examples…Medical services, legal services, education

Trade-off vs. Opportunity Cost
Trade-off = All the choices given up
Opportunity Cost = Most valuable choice (trade-off)
given up
Example….your time

Entrepreneur
Uses resources (factors of production) to
produce goods and services to satisfy needs
and wants

Entrepreneur
and wants
Page 5 of your text book

Entrepreneur
Uses resources (factors of production) to produce goods and services to
satisfy needs and wants

Entrepreneur
and wants
Examples
La Salle HS
Jack FM
Bank ATM
Amazon.com

Quick Review…
1. 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; a scarcity results
from falling prices.
(c) A shortage is a lack of all goods and services; a scarcity
concerns a single item.
(d) There is no real difference between a shortage and a
scarcity.
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

Homework
• Questions 1 – 7
• PDF page 37

Article
Search Economic Terms

Worksheet
Chapter 1, Section 1

Student videos
http://www.youtube.com/watch?v=fdM8ssBvN

THREE MINUTE BREAK
http://www.online-stopwatch.com/full-
screen-stopwatch/

Production Possibilities Curve
Graph showing the trade-offs (i.e. possible
production outcomes)

Graph showing the trade-offs (i.e. possible production outcomes).
Trade offs is a key concept. More of one good or service, less of
the other.
Product (good
or service) B
Product (good or service) A

Why is the production possibilities curve
“bowed out”?

“bowed out”?
 ANSWER: The Law of Increasing Opportunity Costs

“bowed out”?
 As you produce more of one product (Good or Service A),
the cost (opportunity cost) increases.

“bowed out”?
 As you produce more of one product (Good or Service A),
 WHY you might ask
Book Example

Watermelons
(millions of tons)
Shoes
(millions of pairs)
Shoes(millionsofpairs)
25
20
15
10
5
0 252015105
Production Possibilities Graph
Watermelons (millions of tons)
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
A production possibilities graph shows the cost of producing more of
one item. To produce four million more shoes (move from point c to
point d) is a cost of 3 million pairs of shoes. The Trade Off (the
real cost) of producing four million more shoes (to go from 14 to 18)
is the three million tons of watermelons that you give up (going from
12 to 9)

Watermelons
(millions of tons)
Shoes
(millions of pairs)
25
20
15
10
5
0 252015105
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the fifteenth million pair of shoes (one
million pairs of shoes that happens to be the fifteenth million)?

Watermelons
(millions of tons)
Shoes
(millions of pairs)
25
20
15
10
5
0 252015105
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the fifteenth million pair of shoes (one
million pairs of shoes that happens to be the fifteenth million)?
ANSWER: Eight million tons of watermelons

Watermelons
(millions of tons)
Shoes
(millions of pairs)
25
20
15
10
5
0 252015105
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the first million pair of shoes?

Watermelons
(millions of tons)
Shoes
(millions of pairs)
25
20
15
10
5
0 252015105
14
18
20
21
12
9
5
0
0 15
8 14
c (14,12)
d (18,9)
What is the cost to produce the first million pair of shoes?
ANSWER: 200,000 tons (1/5 of a million) of
watermelons

Law of Increasing Costs…Revisited
The Law of Increasing Opportunity Costs - As you
produce more of one product (Good or Service A),
The cost of first million shoes cost
200,000 tons of watermelons
The cost of the fifteenth million (still one
million shoes) cost five million tons.
THE COST INCREASED

Law of Increasing Costs…Continued
Why is that the case?

Law of Increasing Costs…Continued
Why is that the case?
Because the entrepreneur uses the best
shoe making resources (factors of
production) for making shoes first…the
worst is used last.

25
20
15
10
5
0 252015105
g (5,8)
A point of
underutilization
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14)
S
Efficiency means
using resources in
such a way as to
maximize the
production of goods
and services. An
economy producing
output levels on the
production possibilities
frontier is operating
efficiently.

25
20
15
10
5
0 252015105
T
Future production
Possibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14)
S
Growth If more
resources become
available, or if
technology improves,
an economy can
increase (more stuff) its
level of output and
grow. When this
happens, the entire
production possibilities
curve “shifts to the
right.”

Guns or Butter
Phrase used by economists to describe trade-offs.
Military Goods
(guns)
Consumer Goods
(Butter)

Worksheet, Production Possibilities Curve

Homework
Read Chapter Two, Questions 1 – 6 (page 47)
Review Powerpoint for next class (online)
Read “Current Reading Assignment” (online)
Reading Assignment for next class
The subject of the article is the importance of human
capital
Questions to consider (i.e. be able to
answer)
• Why is Taiwan doing well?
• What factor of production is key to Taiwan’s success?
• Which factor of production was important....
 When Columbus sailed to the new world?
 During the period of colonization?
 During the industrial revolution?
• How does this effect you in 2013?

Period 1 (Aug. 14), Period 2 (Aug 14), Period 4 (Aug 15)

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