CHAPTER 1 WHAT IS ECONOMICS?
S1: Scarcity and Factors of Production
S2: Opportunity Cost
S3: Production Possibilities Curves
BELL WORK: S1 (10 MINUTES)
Get book, folder, and texts
Pick up Chapter 1 and Unit Worksheets
3 hole punch them and place in Folders
Answer A – E on Unit 1 Essay Warm-up
Pgs. 29-30
SECTION 1:
SCARCITY AND FACTORS OF PRODUCTION

Chapter 1 Essential Question

Need to be able to answer this!!
 “How
can we make the best
economic choices?”
Write at top of S.1 notes

Objectives to learn
Why scarcity and choice are the basis of economics
 What entrepreneurs do
 3 factors of production and differences bt
human/physical economics
 How scarcity affects the factors of production

KEY TERMS
Turn to page 2
 Slideshow on Web


http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13369833-5/Flash/Ch01/Econ_OnlineLectureNotes_ch1_s1.swf
WHY ARE SCARCITY/CHOICE
ECONOMICS?

BASIS OF
How does Scarcity force people to make economic
choices?
Makes everyone make choices by making us decide
which options are most important to us
 Scarcity states there are limited goods/services for
unlimited wants.


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People need to make choices in order to satisfy m/i wants
People satisfy their needs/wants w/ goods/services

People’s needs/wants are unlimited, goods/services are not
WHY ARE SCARCITY/CHOICE
ECONOMICS?
BASIS OF
Economics begins w/idea that people cannot have
everything they want/need
 The fact that limited amounts of goods and
services are available to meet unlimited wants is
called scarcity.

Scarcity forces people to make choices but it is not
the same as a shortage.
 Shortages are temporary while scarcity always exists.

WHAT DO ENTREPRENEURS DO?
Entrepreneurs play a key role in turning scarce
resources into goods/services
 Willing to take risks in order to make a profit
 They:….

Develop original ideas
 Start businesses
 Create new industries
 Fuel economic growth


1st Task is to assemble factors of production
Land
 Labor
 Capital

FACTORS OF PRODUCTION: LAND
Refers to all natural resources used to produce
goods/services
 Resources include:






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Fertile land for farming
Oil
Coal
Iron
Water
Forests
FACTORS OF PRODUCTION: LABOR
Labor is the effort people devote to tasks for $$
 Labor includes:



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Medical care provided by a doctor
Instruction provided by a teacher
Tightening of a bolt by an assembly-line worker
Creation of painting by an artist
Repair of television by technician
FACTORS OF PRODUCTION: CAPITAL
Refers to any human-made resource that is used
to produce other goods/services
 Economy requires both human/physical capital


Physical
Buildings
 Equipment
 Tools


Human
College education
 Training
 Job experience

BENEFITS OF CAPITAL
Key factor for production b/c people and
companies can use it to save time/money
 Benefits of capital

Increased efficiency
 Increased knowledge
 Better time-management
 Increased productivity

SCARCE RESOURCES
 Checkpoint:
Why are goods/services
scarce?




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Goods/services are scarce b/c the resources used to
produce them are scarce
Only so many natural resources available to produce
goods
Labor for production can be limited
Physical capital can be limited for many industries
Each resource may have alternative uses

People, businesses, govt.s must choose which alternative
they want most
LESSON CLOSING

Entrepreneur simulation on Pearson


Class Demonstration
Go back and answer the Chapter Essential
Question

“How can we make the best economic choices?”

Found on page 4 of Chapter Warm-up


A-D
Homework

Read Section 2: pgs. 8-12
SECTION 2: BELL WORK
Get books, folders
2 Choices;
Grab scratch paper and copy “bubble” chart on pg. 8
Put “bubble” chart at top of S.2 notes
Answer
Questions to captions on pg. 5 and 9
Think, pair, share
S.2: OPPORTUNITY COST

Guiding Question


Objectives to learn




How does opportunity cost affect
decision making? Write at top of S.2 Notes
Why every decision involves trade-offs
The concept of opportunity cost
How people make decisions by thinking @ the margin
Key Terms

http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13369833-5/Flash/Ch01/Econ_OnlineLectureNotes_ch1_s2.swf
HOW DOES OPPORTUNITY COST AFFECT
DECISION MAKING?
Every time we choose to do one thing, we are
giving up the opportunity to do another
 When we make decisions about how to spend our
scarce resources, like money/time, we give up our
chance on something else
 All indiv’s, businesses, and large groups make
decisions that involve trade-offs
 Trade-offs involve things easily/not easily
measured


Money, property, time, and things not easily
(enjoyment or job satisfaction)
HOW DOES OPPORTUNITY COST AFFECT
DECISION MAKING?

Businesses and Govt. trade-offs

Businesses make trade-offs when they decide how to
use their factors of production


Famer uses land to plant corn, cannot use same land to
plant soybeans
Govt’s make trade-offs when they decide to spend
money on military needs instead of domestic, or
vice-versa
Checkpoint: What are trade-offs?
 Answer economics and you from BW

WHAT IS OPPORTUNITY COST?
Most trade-offs have
one of the “rejected”
alternatives being
more “desirable” than
rest
 That most desirable
alternative given up
by the decision is the
opportunity cost

HOW DO PEOPLE MAKE DECISIONS

Decision making grid
Can help you decide if
you are willing to
accept the opportunity
cost of a choice
 Read thru pg. 10
 Answer 2 ?s


Thinking @ the Margin
When you decide how
much/less to do you are
thinking on the margin
 Involves comparing
opportunity costs/benefits


Called cost/benefit analysis
THINKING AT THE MARGIN

Marginal Costs and Benefits

To make good decisions you must weigh the marginal
costs against marginal benefits
M.Cost = extra cost of adding one unit such as sleeping or
getting one more cookie
 M. Benefit = extra benefit from adding one unit such as
sleeping or getting one more cookie


Once the marginal costs outweigh the marginal benefit,
no more units can (or will) be added
Example: 1 more cookie is o.k. b/c it is only 35 more calories
but once the unit cost (calories) exceeds what the benefit
(satisfaction) is you will not add anymore.
 Best example is how often you tell yourself you can “sleep just
____ much longer” before there is a cost you aren’t willing to
put up with

COST/BENEFIT ANALYSIS

Read and answer figure 1.1 on making decisions
at the margin


Answer the 2 ?s
Decision making at the margin

Like opportunity cost, thinking at the margin applies
to businesses/governments as well
Employers think @ margin when they decide how many
workers to hire
 Legislators think @ margin when they decide how much to
increase govt. spending on a project
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LESSON CLOSING

Trade-off worksheet


Complete pg. 5: Chapter Essential ?


Complete and have ready for tomorrow
“Scarcity, choices, and you!”
Video to watch while working

Nature of Economics
SECTION 3 BELL WORK
Finish up Trade-off worksheet
Have Worksheet ready to go over
Start Nature of Economics: 1st 12:00
S3: PRODUCTION POSSIBILITIES CURVES

Guiding Question


Learning Objectives




“How does a nation decide what/how
much to produce?” Write at top of S3 notes
Interpret a PPC
Explain how PPC’s show efficiency, growth, and cost
Why a country’s production possibilities depend on its
resources and technology
Key Terms

http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13369833-5/Flash/Ch01/Econ_OnlineLectureNotes_ch1_s3.swf
HOW DOES A NATION DECIDE WHAT/HOW
MUCH TO PRODUCE? PPC CURVES!!

To help decisions, economists use PPCs as a tool


Curve helps nation’s economists determine alternative
ways of using a nation’s resources
Production Possibilities

Economists use graphs to analyze choices/trade-offs that
people make


To draw PPC, begin by deciding which goods/services to
examine.
 Refer to graph, pg. 14
Production Possibilities Frontier
Line that shows the maximum possible output an economy
can produce
 Each point reflects a trade-off



Happens b/c factors of production are scarce
L, L, and C to make one product means fewer of those to make
the other
WHAT DO PPCS SHOW?

Efficiency
PPF represents an economy working at its most efficient
level
 Economies can work inefficiently, using fewer resources
than capable.



Growth

When an economy grows the curve shifts to right


Underutilization
Production capacity can also decrease, leading to shift left
Cost: Can help show the opportunity costs of Decisions
Cost increases as production shifts from making one item to
another
 Law of Increasing Costs: Refer to Chart pg. 17


Explains as we move along the curve, we trade off more & more
for less & less output
TECHNOLOGY AND EDUCATION
Technology can increase a nation’s efficiency
 Govt.’s spend $$ investing in new tech., education
and training for workforce


Go back and answer Chapter Essential ?

How can we make the best economic choices

Finish up any openings up to page 10
LESSON CLOSING
Work on Guided Reading Reviews
 Complete Case Study
 Fill in Unit 1Body Paragraph


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Pg. 31
HW: Ch.1 Study Guide