Fundamental Economic Concepts Nancy K. Ware, Instructor Gainesville High School

1. Fundamental Economic ConceptsNancy K. Ware, InstructorGainesville High School College Prep Economics GPS EF 1-6 Read EOCT text p.17-36 Complete all questions at the end of each section & end of the chapter. Name___________________Period______

2. Unit 1 Coursework Required throughout the Unit • Read EOCT text p.17-36 • Complete all EOCT Text questions at the end of each section & end of the chapter. • Vocabulary strategy sheet • All activities, fill in the blanks, and questions in the GPS packet. • Fundamental Crossword puzzle • Calvin & Hobbes Economic cartoon • Production Possibilities Graphing exercise • Take home vocab quiz • This list is subject to change.

3. GPS 1: Scarcity, Opportunity Costs, Trade offs Underline your vocab words • SSEF1: Explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and trade offs for individuals, businesses and governments. • Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources. • Define and give examples of productive resources (e.g. land (natural), labor (human), capital (capital goods), and entrepreneurship (human intellect & money) • c) List a variety of strategies for allocating scarce resources • d) Define opportunity cost as the next best alternative given up w hen individuals , businesses, and governments confront scarcity by making choices Videos: Scarcity & Productive Resources

4. EF GPS 1a-d: Essential Questions • What is scarcity? • Why does it exist? • What are productive resources? • What are some examples? • What are some strategies for allocating scarce resources? • What is opportunity cost? • How does it relate in making decisions?

5. VOCABULARY STRATEGYDirections: In the 1st column are the vocabulary terms and or concepts you need to know for this unit. In the 2nd column, write what you know about the vocab/concept. In the 3rd column, write additional information you may not have known.

6. EF1a: What is scarcity? Basic condition that exists when unlimited wants exceed limited productive resources. • What is Economics? • With a partner: make a list of your basic everyday needs and your wants. below Choose which ones you want fulfilled everyday. • Why can’t you have everything you want and need? How does this picture depict scarcity?

7. Are these goods or services?

8. EF1b: What are productive resources? What are some examples?Write the name of the resource under or beside the picture. • Resources ~ Define • Land: • Labor: • Capital: • Entrepreneurship: • Renewable: • Non-renewable:

9. EF1b: What are productive resources? What are some examples?Write the name of the resource under or beside the picture. • Resources ~ Define • Land: Any natural resource • Labor: Human effort contribution to production for a wage • Capital: Structures/equipment used to produce a final good/service • Entrepreneurship: Creative vision of new industry or business • Renewable: can be used again • Non-renewable: cannot be used again

10. Land, Labor, Capital, Entrepreneurship?

11. Land, Labor, Capital, Entrepreneurship

12. EF1c: List a variety of strategies for allocating scarce resources

13. EF1c: List a variety of strategies for allocating scarce resources

14. Allocation of scarce resources… • With a partner, pick a scarce resource and do some research. • Is this resource renewable or non-renewable? • What are some of the ways your resource is being allocated or recycled? • How easy or difficult is that? • How does this help the economy? • What are the challenges that will arise if the human race uses up all of this resource? On a piece of butcher block paper, draw your resource and answer all the questions above with more pictures than words.

15. Homework  • Practice 1.1 p. 21 Resources and Wants (3 questions) • Finish Land, Labor, Capital Graphic Organizer • Finish Strategies for Resource Allocation Graphic Organizer • Keep working on GPS 1 Vocab • Read your notes • Don’t ever quit.

16. EF1d: Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices • What is opportunity cost? • With a partner: demonstrate opportunity cost. You can choose to portray an individual, business, or government. Create a 1 to 2 minute scenario & act out your choice for the class.

17. GPS 2: Rational Decision MakingUnderline your vocab words! • SSEF2: Give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action • Illustrate by means of a production possibilities curve the trade offs between 2 options • Explain that rational decision occurs when the marginal benefits of an action equal or exceed the marginal costs Videos: Cost/Benefit Analysis in Decision Making, Opportunity Cost

18. GPS 2 Essential Questions • What is a Production Possibilities curve? • What is a trade off? • What is opportunity cost? • What is a rational decision? • What should outweigh what in making good decisions?

19. a. Illustrate by means of a production possibilities curve the trade offs between 2 options Pick 2 products that the USA produces & create a production possibilities curve. 0

20. Illustrate by means of a production possibilities curve the trade offs between 2 options • A production possibilities graph shows a__________ways that an economy can use its r____________. • The production possibilities f___________ is the line that shows the maximum possible output for that economy. (aka: _____________) What 2 products is this economy producing? If this economy produces 15 millions pairs of shoes, how much watermelon does it produce? Why? If any economy is currently making 18 million tons of watermelon, and they decrease production to 14 million tons of watermelons, what is the benefit? (what does the economy gain?) What does the economy lose when it changes production as in question 4 above? Where is the economy being the most productive for both products?

21. Illustrate by means of a production possibilities curve the trade offs between 2 options • A production possibilities graph shows alternative ways that an economy can use its resources. • The production possibilities frontier is the line that shows the maximum possible output for that economy. (aka: EFFICIENCY) What 2 products is this economy producing? shoes and watermelons If this economy produces 15 millions pairs of shoes, how much watermelon does it produce? 0 Why? Because all of its resources have been allocated to shoe production If any economy is currently making 18 million tons of watermelon, and they decrease production to 14 million tons of watermelons, what is the benefit? (what does the economy gain?) 3 millions pairs of shoes produced What does the economy lose when it changes production as in question 4 above? 4 million tons of watermelon Where is the economy being the most productive for both products? Point C

22. Production Possibilities Graph 25 20 15 10 5 S Shoes (millions of pairs) a (0,15) b (8,14) c (14,12) g (5,8) d (18,9) A point of underutilization e (20,5) f (21,0) 0 5 10 15 20 25 Watermelons (millions of tons) Efficiency • Efficiency means….. • Cost is…… • Underutilization is…..

23. Production Possibilities Graph 25 20 15 10 5 S Shoes (millions of pairs) a (0,15) b (8,14) c (14,12) g (5,8) d (18,9) A point of underutilization e (20,5) f (21,0) 0 5 10 15 20 25 Watermelons (millions of tons) Efficiency Economy is balanced & efficient . Why? Economy is efficient making both products • Efficiency means….. using resources in such a way as to maximize the production of goods and services. An economy producing output levels (the points on the graph) on the production possibilities frontier is operating efficiently. • Cost is what is given up to produce more of the other product • Underutilization: the economy is not being efficient with resources aka. recession

24. Production Possibilities Graph 25 20 15 10 5 Future production Possibilities frontier T S a (0,15) Shoes (millions of pairs) b (8,14) c (14,12) d (18,9) e (20,5) f (21,0) 0 5 10 15 20 25 Watermelons (millions of tons) Growth • Growth is….. • The economy grows if….. • The frontier line JUMPs to…. The right. The entire production possibilities curve “shifts to the right” when an economy grows.

25. Production Possibilities Graph 25 20 15 10 5 Future production Possibilities frontier T S a (0,15) Shoes (millions of pairs) b (8,14) c (14,12) d (18,9) e (20,5) f (21,0) 0 5 10 15 20 25 Watermelons (millions of tons) Growth • Growth is…..when something increases in size • The economy grows if …..more resources become available, or if technology improves, an economy can increase its level of output and grow. • The frontier line JUMPs to…. The right. The entire production possibilities curve “shifts to the right” when an economy grows.

26. 2b: How DO YOU make a GOOD Decision? • Write a short paragraph with a partner. Describe HOW you go about making a decision. It must be a real life situation that you write about. • How do you know if you have made a rational, good decision? Be prepared to share with the class.

27. EF2b: The Decision Making Process • D = • L = • S = • E = • M = • In the end, what should outweigh what???

28. EF2b: The Decision Making Process • D = define the problem (root cause or issue) • L = list the alternatives (other choices) • S = state the criteria (priorities & how to judge the situation) • E = evaluate the alternatives (what are the trade offs & opportunity costs of each alternatives? What can you live with?) • M = make a rational decision (what is the marginal benefit? What is the marginal cost?) • What should outweigh what???

29. EF2b: Give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action • What Would You Do? A game of decision making • You will be given a scenario • Complete the steps of the decision making process (p. 21) • List each step & give the details of the thought process • Include what the opportunity cost, trade off, marginal benefit & costs are of your decision • Explain here how your decision is a rational decision (when the marginal benefits of an action equal or exceed the marginal costs)

30. Homework  • Practice 1.2 p. 25 Economic Decision Making (3 questions) • Finish anything from class you did not complete • Keep working on GPS 1 Vocab. You should be half way done. • Read your notes!! • Don’t ever quit.

31. GPS 3: Specialization and Voluntary Exchange underline the vocab word! • SSEF3: Explain how specialization and voluntary exchange between buyers and seller increase the satisfaction of both parties. • Give examples of how individuals and businesses specialize. • Explain that both parties gain as a result of voluntary, non-fraudulent exchange. Videos: Division of Labor/Specialization & Incentives

32. GPS 3 Essential Questions • What is specialization? • What is voluntary exchange? • How do these 2 concepts combine to create satisfaction of both buyers and sellers? • How do businesses specialize? • How do consumers and producers gain from voluntary, legal exchange?

33. 3a: Give examples of how individuals and businesses specialize ~ Role Play or Draw • What is Specialization? • What is Division of labor? • Activity with a partner, Pick a product/service that requires specialization. Draw picture of your business and the division of labor. Give examples of HOW a business or individual specializes. Tell WHY a business would want to practice this! • Use a clean piece of white paper 

34. 3a: Give examples of how individuals and businesses specialize ~ Role Play or Draw • What is Specialization? Devotion of resources to a task • What is Division of labor? Splitting up work into smaller tasks • With a partner, Pick a product/service that requires specialization. Draw picture of your business and the division of labor. Give examples of HOW a business or individual specializes. Tell WHY a business would want to practice this! • Use a clean piece of white paper 

35. Specialization & Division Of Labor Example Specialization: A Hotel. What does a hotel specialize in? Division of Labor: What are the different jobs found in a hotel?

36. 3b: How does Voluntary Exchange benefit the consumer & producer? • Benefits for the Consumer • C____________ • B___________Quality Product • Lower ___________ • More V___________ • Greater __________for Business • Benefits for the Producer • E_____________y • P______________y • Encourages t___________, i_____________ & innovations • Greater __________

37. Voluntary Exchange • Benefits for the Consumer • Competition • Better Quality Product • Lower prices • More Variety • Greater Profit for Business • Benefits for the Producer • Efficiency • Productivity • Encourages technology, inventions & innovations • Greater profit

38. 3b: Explain that both parties gain as a result of voluntary, non-fraudulent exchange. (p. 24 EOCT) • Written homework: Now that you know what the benefits of voluntary exchange are for the consumer and producer, draw a picture of a personal voluntary exchange you recently experienced. Explain the benefit to you and to the producer with your drawing.

39. Homework  • Practice 1.3 p. 31 Economic Systems (3 questions) • Finish your rational decision paper • Finish your voluntary exchange drawing • Read over your notes!! • Don’t ever quit!!