Unit 1: Chapter 1
What is Economics?
-Scarcity
-FOPs
-Economic Concepts
Essential Question
1. Are you satisfied with the possessions you
have in life? If not, why? If yes, why?
Why can’t always get what we want!
• What is Economics?
– Study of how people try to satisfy what appears to
be seemingly unlimited and competing wants
through the careful use of relatively scare
resources
• Scarcity: the condition that results form
society not having enough resources to
produce all the things people would like to
have.
– How does this effect us?
What I want and what I need
• Want: a way of
expressing a need.
• “I want to eat lunch at
Chipotle.”
–
–
–
–
–
Jordan’s
Clothing from Hollister
Iphone and ipad
Mercedes Benz
5 bedroom house for 2.
• Need: Basic
requirement needed for
survival.
• “I need to eat, so I can
concentrate in school.”
–
–
–
–
–
Food
Water
Shelter
Clothing
shoes
TINSTAAFL
• “There is no such thing as a free lunch”
– We have limited
– Nothing is free
3 Basic Economic Questions
1. What to Produce?
2. How to Produce?
3. For Whom to Produce?
1. Why do we need to consider these questions?
•
•
•
•
Factors of Production
Entrepreneurship
Land
– “gifts of nature” / natural resources not man made
– Fields, deserts, livestock, sunshine and climate
– What social factors may affect the availability of land?
Labor
– People with efforts, abilities, and skills
– Non-entrepreneurs
– What social factors may affect the availability of labor?
Capital
– Tools, equipment, machinery, factories.
– Items used to produce goods or services
– Financial capital: What is it?
– What social factors may affect the availability of capital?
Q: How are these three factors interconnected?
Review of Section 1: What is Economics?
1. Which response best explains why the study of economics is important?
a.
Describes our standard of living
b.
Become better decision makers
c.
Increase our consumption of consumer goods
d.
Determine what goods out to be produced
2. Which response best explains the money used to buy the tools and equipment needed for
production?
a.
Capital goods
b.
Financial capital
c.
The factors of production
d.
Wealth
3. Which response does not explain the factors of production?
a.
entrepreneurship
b.
money
c.
Labor
d.
capital
Economic Concepts
• GDP: the dollar value of all final goods and
services and structures produced within a
countries borders in a 12-month period.
Peer Activity: Follow Up
• Look through advertisement ads
• Find wants and need and post them.
• Try to find at least 1 form of Land, labor, and
capital through pictures or words
• Post on construction paper.
Economics Choices: Opportunity Cost, You’ve
Economized!
VS.
How do incentives and utility influence your
decision making?
How do trade-offs and
opportunity cost influence
your cost-benefit
analysis?
Making Choices involves…
1.Motivation for Choices
2.TINSTAAFL
3.Decision –Making Process
Application: You have enough money to
buy either an iPod touch player that is on
sale or some school supplies you want.
What incentives and utility would guide
your decision?
Marginal Cost and Marginal
Benefits
• Cost: additional cost of using 1 more unit of a
product
• Benefits: additional satisfaction from using 1
more of a product
• Turn to page 16
• Complete a decision making grid in your
group under application C.
Analyzing Decision Making Grid
• Turn to page 15 in your textbook
• Follow along as we review the grid
• Follow up questions:
– What is Max’s opportunity cost of three hours of
study?
– What is Max’s marginal cost moving from a grade
of B+ to a grade of A-?
2 pts EC **What prediction would analyzing the
marginal cost and marginal benefits illustrate?
Production Possibilities Curve PPC
• Illustrates the impact of scarcity on an economy by showing
the max number of goods and services that can be produced
using limited resources. (Based on assumption)
• Assumptions
1.
2.
3.
4.
Resources are fixed
All resources are fully employed
Only two things can be produced
Technology is fixed
– PPF?
What do PPCs teach us?
•
•
•
•
Our efficiency as a nation
Underutilization
Law of increasing opportunity cost
Shifts in PPC
Branches of the Economic
Macroeconomics
• Whole economy
Microeconomics
• Individual economy
– Economic growth, stability,
and international trade
– Consumer markets, business
markets, and labor markets
– Interest: money, banking,
finance, government taxation
and spending polices,
unemployment and
employment
– inflation
– Markets, prices, costs, profits,
competition, government
regulation, consumer
behavior, business behavior
Houston we have a problem!
Problem
Task
• Shortage of Money
• Scarcity of Items
• Form groups of 2 or 3
• 5 minutes to discuss ways to
distribute the popcorn
(remember our constitution)
• list all possible ways as a
class (No discussion)
• Lets Group categories
• Advantages and
Disadvantages
• 1 vote each to determine
who gets the popcorn
– Popcorn
– Pop tarts
– Warheads
• Alternatives Choices
• What will it cost?
– i.e. buying a $10,000 used
car, going to a movie with
friends next Thursday night
Why is it important for economist to use to
positive and normative economics? illustrations
• Read Section 4
• Create the table below and complete this
section with a partner and be ready to discuss.
Concepts
Charts and
Tables vs.
Graphs
Micro vs.
Macro
Positive vs.
Normative
Similarities
Differences
Adam Smith Reading
• What division of labor trends are found in
smaller factories?
• What is the division of labor needed?
• What problems do you believe may happen
with the division of labor visible in a large
factory?
• What was Adam Smith’s purpose of this
article?