The Choice is Yours Economics Unit 2 by Constance J. Wehner
Remember our themes! • Gains from trade • Incentives • Interdependence • Scarcity
scarcity opportunity cost production possibilities frontier incentive marginal value utility factors of production trade-off cost-benefit analysis TINSTAAFL circular flow of economic activity services capital entrepreneurship land labor Terms
Standards • SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs and trade offs for individuals, businesses and governments.a. Define scarcity as a basic condition which exists when limited productive resources exceed unlimited wants.b. Define and give examples of productive resources as land (natural), labor (human), capital (capital goods), entrepreneurship.c. List a variety of strategies for allocating scarce resources.d. Define opportunity cost as the next best alternative given up when individuals, businesses and governments confront scarcity by making choices.
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.a. Illustrate by means of a production possibilities curve the trade offs between two options.b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
SSEF6 The student will explain how productivity, economic growth and future standards of living are influenced by investment in factories, machinery, new technology and the health, education and training of people.a. Define productivity as the relationship of inputs to outputs.b. Give illustrations of investment in equipment and technology and explain their relationship to economic growth.c. Give examples of how investment in education can lead to a higher standard of living.
SSEPF1 The student will apply rational decision to the making of personal spending and savings choices.a. Explain that people respond to positive and negative incentives in predictable ways.b. Use a rational decision making model to select one option over another.c. Create a savings or financial investment plan for a future goal.
Enduring Understandings • Parties respond predictably to positive and negative incentives. • Because of interdependence, a decision made by one party has intended and unintended consequences on other parties. • Scarcity of all resources forces parties to make choices and that these choices incur a cost.
Essential questions for EU 1 Parties respond predictably to positive and negative incentives. • How do the decisions of individuals, businesses & government affect different parts of society? • How will incentives affect individuals within a society differently?
Essential question for EU 2 Because of interdependence, decision made by one party has intended and unintended consequences on other parties. • Why should people weigh the advantages & disadvantages of different alternatives when making choices?
Essential questions for EU 3 Scarcity of all resources forces parties to make choices and that these choices incur a cost. • Why is scarcity considered the basic problem of any society? • Why should people weigh the advantages & disadvantages of different alternatives when making choices? • How does investment affect productivity and economic growth? • How can a rational plan for decision-making in spending & saving help achieve future goals?
The Wonderful World of Corn, and how “greener” energy is making your pizza more expensive • Corn is used to make many things, including food for humans, food for food animals, and food for your car. • Rising costs for imported oil have increased the demand for ethanol, a fuel which can be made from corn. While ethanol is not as efficient as gasoline, it comes from a renewable resource and is considered more environmentally-friendly
Partner work With your table partner, read one of the three news stories for this unit and answer the following questions: • Who are the parties named in this story? • Which of the parties will benefit from the new demand for corn, and which will not? • How do the decisions of individuals, businesses & government affect this situation? (EQ1) • What incentives will result from this, and how will they affect consumers, farmers, and manufacturers?
More partner questions • Why is scarcity considered the basic problem of any society? • In this instance, which commodities are scarce, and how are they being used? • If you were in charge of allocating all the corn in the United States, what would you do? • In what ways would this be better or worse than allocation by the free market?
Production Possibilities (PPF) • Graph used to show two choices • If all resources are used efficiently, the production possibilities frontier is reached • When one choice is made, the graph shows the opportunity cost in terms of the other
Economic growth on PPF • Expansion of the Economy's Productive Capacity • There are two factors that will allow our production possibilities frontier to shift outward over time. The first is an increase in our resources. The second is due to improvements in technology
The inverse relationship • The opportunity cost shown in a production possibilities curve: when one variable goes up, the other goes down.
The circular flow of economic activity productmarket factor market
What are the unintended consequences of using ethanol to reduce our dependence on foreign oil? • What choices are involved? • What are the opportunity costs?