Intro
Question–
How does
economics
affect
everyone?
Pair/Share
 Get
with a partner and share
your ideas.
 You will be sharing your
partner’s ideas to the class.
 How
does economics affect
everyone?
Something to Think About!
 How
many people touched your shirt
before it came to be yours?
 How
does your money affect the world?
 How
can you vote with your dollar?
So how does it?
 Our
resources are limited.
 But our needs and wants are unlimited.
 Which leads to difficult decisions about
efficiency and necessity.
 Economics



is about freedom.
You can do what you want with your money.
The markets respond to the dollars spent.
But to do what you want, you have to have the
money.
What is scarcity?
 The
constant condition in which only limited
amounts of goods and services are available to
meet unlimited wants and needs.
 What

Money? Time? Love? Donuts?
 What

is there not enough of in your life?
about time to create lasting friendships.
The Sims
Think about it.
 How
do you make the correct decision?
 How
do you know which is more important?
 How
does scarcity force people to make
economic decisions?
Wants
Wants
vs. Needs
Needs
Arrange the following items in their respective positions:
Flowers, Water, Car, In-N-Out, Gasoline, Coffee, Clothes
Wants and Needs
 Why
 Did
 Are
did the items land where they did?
any items fall in both categories?
all wants and needs the same for all
people?
Question:
 How
do all decisions in your life and in the
world somehow involve trade-offs?
 Share
your thoughts on the question.
 You will be sharing your partners ideas to
the class.
Opportunity
Costs
Chapter 1 Section 2
Trade-Offs
 Guns


or Butter?
Government Dilemma
Spend on Military needs or domestic needs.
 Why
is the government faced with these
tough decisions?

Scarcity.
Opportunity Costs!
 The
most valuable thing you are forced to give up
in order to carry out a decision is your opportunity
cost.
 When
you stay up late at night to study, what is
your opportunity cost?



What do you gain from studying more?
What do you lose?
What about the opposite scenario?
The Cost of College
Year
Direct Costs
of College
1
$20,000
Opportunity
Costs (Lost
Wages)
$16,000
2
$20,500
$16,500
3
$21,000
$17,000
4
$21,500
$17,500
Total
$83,000
$67,000
The Total Cost of College
College Costs + Opportunity Costs =
$83,000 + $67,000 =
$150,000
Economic Mystery
"When it takes, at least, an additional
seven years of schooling, and over
one hundred thousand dollars in
costs and lost earnings, why would
a person want to graduate from
college instead of dropping out
after the ninth grade?"
Pillows can cost you!
 How
were keeping extra decorative pillows
benefitting Ben Stiller?
 What
were the costs of keeping those pillows and
preparing them daily?
 Is
the value of the pillows worth more than the
upkeep cost?
 Time
can be an opportunity cost.
Marginal Analysis
 Taking
the time to analyze how each
aspect of a decision, when changed,
affects the final outcome of the decision.
 Study

or Sleep
How each hour helps your grade improve
vs. how each hour of lost sleep affects your
mood.
Marginal Analysis –
Sleep or Study?
Options
Marginal Benefit
Marginal Cost
1st hour of extra
study time
Grade of C on test 1 hour of sleep
2nd hour of extra
study time
Grade of B on test
3rd hour of extra
study time
Grade of A on test 3 hours of sleep
2 hours of sleep
Marginal Analysis –
Food!
 Combo

Burger and Fries - $10
 Combo

 Is


#1
#2
Burger, Fries, and a Milkshake - $13
the milkshake worth the extra $3?
This is thinking at the margin.
What is the opportunity cost of that $3?
The Next Step: Business!
 In
order to create a successful business, an
entrepreneur must be a quality marginal analyst.


Use Resources Wisely
Combine the factors of production to create new
products or services.
 Factors
of Production – All resources combined

Scarcity – Not everyone can be successful
Competition – Not everyone can be good enough
Efficiency – May the most efficient win!

LAND, LABOR, and CAPITAL


Factors of Production - Land
 For
economists, land is more than dirt!
 Land – All natural resources found on or
under the ground that are used to make
products/services.


Water, Forest, Fish, Iron, Coal, Plants
Why wouldn’t a parking lot be considered
a land factor of production?
Factors of Production - Labor
 Labor
is more than elbow grease!
 Labor – All of the human time, effort, and
talent used to product goods/services.

Garbage Collectors, Mechanics, Surgeons,
Police, etc.
Factors of Production - Capital
 Capital
is more than just money!
 Capital
– Resources used/made by people
and kept for use in producing and distributing
goods and services.

Physical vs. Human Capital
 Tools,
machinery, factories, offices, cell phones,
roads, airports, etc = Physical Capital
Factors of Production - Capital
 Human
Capital – A person’s knowledge or skills
used to help create goods/services.

Human capital is the key to quality
entrepreneurial work.
Land or Capital – Quick Test!
 Ice
at Mount Everest
 Ice in a skiing field
 Sea
water
 Sea water in a seafood restaurant
 Sharks
in the Atlantic Ocean
 Sharks at Sea World
Exit Question  What
do you believe has the potential to
be a large economic success in the future
in regards to business opportunities?
 Think
of the field/item/service that will be
a great opportunity.