Chapter 1: What is Economics?

1. Chapter 1: What is Economics? Section 1: Scarcity ad the Factors of Production Section 2: Opportunity Cost Section 3: Production Possibility Curves

2. Section 1 Objectives Explain why scarcity and choice are the basis of economics. Describe what entrepreneurs do. Define the three factors of production and the differences between physical and human capital. Explain how scarcity affects the factors or production.

4. You have one minute… Create a list of items you would buy from the supermarket if money were no object.

5. Scarcity and Choice • Need: something essential for survival • Examples: • Want: something we desire but not necessary for survival • Examples: • Goods: physical objects • Examples: • Services: actions or activities that a person performs • Examples:

6. Scarcity Needs Wants

7. Scarcity and Economics • Forces people to make choices • Limited amounts of goods and services are available to meet unlimited wants • Economics: the study of how people seek to satisfy their needs and wants by making choices • Individually • In groups • Government

8. Entrepreneurs • People who decide how to combine resources to create new goods and services • Must assemble the Factors of Production • Land – natural resources • Labor – effort people put forth to complete a task • Capital – anything used to produce other goods and services • Physical capital • Human capital

12. Section 2: Opportunity CostObjectives Explain why every decision involves trade-offs. Summarize the concept of opportunity cost. Describe how people make decisions by thinking at the margin.

14. Trade-Offs • Bell Ringer: Page 8 • Define trade-0ffs. • List 3 trade-offs you have made.

15. Trade-Offs • Trade-off: the act of giving up one benefit in order to gain another greater benefit • Individuals • Businesses • Governments • “guns or butter” • “Like Santa with a wish list that cannot be satisfied, the country enters the New Year with a needs list that far exceeds our revenue sources. It appears once again that is time to wage the debate of guns or butter…Citizens are simultaneously confronted with funding a war abroad and dealing with rising health costs, increased fuel costs and declining human services at home.” – Charles Bogue, “Guns or Butter,” Napa Valley Register

16. Writing: Trade-offs • Think about the quote we just read. In our current time, what should the government spend money on? • How to write for Mrs. Miles • 5-8 paragraphs • Introduction – Attention grabber, background information, thesis statement • Middle Paragraphs – point, counter-point, point IN ALL MIDDLE PARAGRAPHS. Do not write a counter-point as its own paragraph. Do not write a point as its own paragraph. • Closing – Sum up your main points, restate your thesis • Go!

17. Writing • “Like Santa with a wish list that cannot be satisfied, the country enters the New Year with a needs list that far exceeds our revenue sources. It appears once again that is time to wage the debate of guns or butter…Citizens are simultaneously confronted with funding a war abroad and dealing with rising health costs, increased fuel costs and declining human services at home.” – Charles Bogue, “Guns or Butter,” Napa Valley Register • In our current time, what should the government spend money on? Guns or butter? Explain acknowledging competing viewpoints. • Introduction • Point, Counter-point, Point • Point, Counter-Point, Point • Point, Counter-Point, Point • Closing

18. Opportunity Cost Opportunity Cost: the most desirable alternative given up as the result of a decision What are some examples?

19. Thinking at the Margin • Thinking at the margin – whether to do or use some additional resource • When is enough enough? • Cost/Benefit Analysis – sacrifice vs. gain • Marginal cost – cost of adding one unit • Marginal benefit – benefit of adding one unit

20. Decision Making at the Margin • Problem: • Options Benefit Opportunity Cost

22. Section 3 Bell ringer: How does a nation decide what and how much to produce?

24. Section 3: Production Possibility Curves • Objectives: • Interpret a production possibilities curve. • Explain how production possibilities curves show efficiency, growth, and cost. • Explain why a country’s production possibilities depend on resources and technology.

25. Production Possibility Curves • Graph that shows alternative ways to use an economies productive resources • Capeland (it’s not a real place) (video) • Watermelons or shoes? • 21 million tons of watermelons • 15 million pairs of shoes

27. Efficiency, Growth, and Cost • Efficiency • The use of resources in such a way as to maximize the output of goods and services • Underutilization • The use of fewer resources than the economy is capable of using • Law of increasing costs • As production shifts from making once good or service to another, more and more resources are need to increase production of the second good or service