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Chapter 1, Section 1

Chapter 1, Section 1

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Chapter 1, Section 1

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  1. Chapter 1, Section 1 Scarcity and the Science of Economics Fatmeh Reda Information compiled from: Glencoe Economics: Principles and Practices

  2. The Fundamental Economic Problem • Think of a time that you wanted something and you couldn’t have it… • Think of a time you had something and you wanted something better… • Think of a time you wanted something and you felt like you had to have it… but it wasn’t a necessity…. • We All Want More Than We Have

  3. Scarcity • The main problem in economics is SCARCITY • This is the condition that results from society not having enough RESOURCES to produce [or make] al the things that people would like to have • And so, ECONOMICS is the study of how people try to satisfy their endless wants through the careful use of scarce resources

  4. Needs and Wants • NEED • Basic requirement for survival • Examples: food, shelter, clothing • WANT • Something we would like to have but is not needed for survival • Examples: toys, movies, books, music players Break-Up Activity In pairs, make a list of items in your notes of things you think are NEEDS. And then make a list of things you think are WANTS.

  5. Three Basic Questions Because we live in a society that has scarce resources, we need to make careful economic choices about how we are going to use these resources.

  6. WHAT to Produce • Should the resources be used to make equipment for the military or to make food? • Should a piece of empty land in a city be used to build a community park or more houses? • Should the land be used to make houses for low-income people, middle-income, or high-income? • Should we use farmland to produce more corn or use it to raise cows for meat?

  7. HOW to Produce • Should factories use only machinery or should workers? • Should factories add more machinery and fire people, or take our machinery and hire more people? OR

  8. FOR WHOM to Produce • This decision is about who will receive the things produced • Are houses for low-income workers, professionals, or the very rich? • Think about target audience and who will buy the product • Who is the target audience for the new Call of Duty game? • Who is the target audience for the Twilight series?

  9. Factors of Production • There are four resources- land,capital,labor, and entrepreneurs, that are needed to produce the goods and services we want.

  10. Land • “gifts of nature” • Natural resources not created by humans • Includes: deserts, fertile fields, forests, mineral deposits, livestock, sunshine, climate • Because its limited, we call is a fixed or limited supply

  11. Capital • Sometimes called CAPITAL GOODS • These are the tools, machinery, equipment, and factories used in to produce goods and services • These were themselves once the result of production

  12. Labor • People with all their efforts, abilities, and skills

  13. Entrepreneurs • Risk takers in search of profits who does something new with existing resources • Driving force behind the economy because they start a new business or bring new products into the market

  14. The Scope of Economics • Economics is a social science because it deals with the behavior of people as they deal with scarcity • Four elements to the study of Economics: description, analysis, explanation, and prediction

  15. Description • Describes economic activity • GROSS DOMESTIC PRODUCT [GDP]: dollar value of all final goods, services, and structures produced within a country’s borders in a 12-month period • This is the most COMPREHENSIVE measure of a country’s total output and measures nation’s economic health

  16. Analysis • Helps to discover why things work and how things happen, and why things are the way they are • Examples: • Why are gas prices so high? • Why are not enough wii made? And how does this affect the price of a wii system?

  17. Explanation • They communicate knowledge after they analyze something • Examples: • Gas prices are high because the United States stopped importing gasoline from Venezuela. • Orange juice prices went up because Florida suffered a freeze two weeks ago and they lost a major part of their crop • Corn is so cheap because many farm and factories produced corn to the point that there is more corn that is needed.

  18. Prediction • Making smart guesses about what might occur in the future • Examples: • Economists predict that house values will continue to decrease in the next two years as more and more homes go on foreclosure. • Economists can predict that based on previous sales of the wii system, coming up with a newly upgraded system will sell out within a few days.