Choices, Choices, Choices, . . .
Concept(S):
Scarcity, Opportunity
Cost, & Trade Offs
Skills: Decision
Making
What you’ll be doing
today…

 Looking at the importance of choice
 Introduction to three major concepts of economics:
1. Scarcity
2. Trade offs
3. Opportunity Cost
You’ll reflect on all this by end of period with some
questions to consider
Preamble

 Your professor first semester in college is describing her
policy on late work. She says you can turn in late work
even after the deadline. But, if you turn the assignment
in on time, and you don’t like the grade, you can resubmit it for review for a higher grade. If you turn in
the work after deadline, and you don’t like the grade
you cannot get it reviewed for higher grade.
 Would you turn in your work on time? Or submit your
work after the deadlines? Explain your thought process
Choices!

Instructions:
 With a partner, walk around and look at all the items
posted on the wall –
 For every pair of items you see- Answer this question:
 “Which do you prefer and why?”
 Explain to your Jedi partner your reasons for your
preference- Jedis you speak first
 You will have 1 min each to discuss with your partner
Debrief…

Discussion Questions:
 What do you gain from your choice?
 What do you lose from your choice?
 Why is choice so important in our daily lives?
Part 1:
The
Basics

WHAT IS ECONOMICS???

 Economics – the study of how individuals and societies
make decisions about ways to use scarce resources to
fulfill wants and needs.
 What does THAT mean?!!??!!
The Study of Economics
Macroeconomics

 The big picture: growth,
employment, etc.
 Choices made by large
groups (like countries)
Microeconomics
 How do individuals make
economic decisions
ECONOMICS:
5 Economic Questions

ALL Societies (we) must figure out
WHAT to produce (make)
HOW MUCH to produce (quantity)
HOW to Produce it (manufacture)
FOR WHOM to Produce (who gets what)
WHO gets to make these decisions?
What are resources?

 Definition: The items used to make other goods
(products)
BUT, there’s a
Fundamental Problem:
SCARCITY: unlimited wants and
needs but limited resources
Choices, Choices
Because ALL resources,
goods, and services are
limited – WE MUST MAKE
CHOICES!!!!
Why Choices?

We make choices about how we spend our money, time,
and energy so we can fulfill our NEEDS and WANTS.
What are NEEDS and WANTS?
Wants and Needs,
Needs and Wants

 NEEDS – “stuff” we must have to survive, generally:
food, shelter, water,
 WANTS – “stuff” we would really like to have
(Fancy food, shelter, clothing, big screen TVs,
jewelry, conveniences . . . Also known as LUXURIES
VS.
TRADE-OFFS

You can’t have it all (SCARCITY –
remember?) so you have to
choose how to spend your money,
time, and energy. These decisions
involve picking one thing over all
the other possibilities – a
TRADE-OFF!
Trade-Offs, cont.
Chew on This!: What COULD you have done
instead of coming to school today?
These are all Trade-Offs!
A special kind of Trade-Off is an
OPPORTUNITY COST =

The Value of the Next Best Choice
(Ex: Sleeping is the opportunity cost of studying for a test)
Opportunity Costs

I have $12 in my pocket
I have $12 in my pocket
 Then, what happens to
If I buy a pizza…
the movies…
Q: What is the opportunity cost of buying
pizza?
Practice

 Several students were talking about taking time off after
graduating high school so they could spend two years traveling
around the world. One student remarked, “It’s a great idea, but
can you imagine how much it would cost? Even if you
backpacked and camped out, it would still cost you $10,000!” An
economics student replied that the sum of money would not
amount to even half the cost. Explain what the economics student
is talking about.
*Hint- Review the concepts of scarcity, trade offs, & opportunity cost
to respond to this scenario.
What are the students gaining? What are they losing? What are the
alternatives (other options)
*Be sure to also underline or highlight the scarce resources, tradeoffs
and/or opportunity cost
Our Plan for the day…

 Discuss the concept of Outsourcing
 Introduce the concept of Factors of Production
 Look at some news coverage and a TV show called
30 days about the pros and cons of Outsourcing
MADE IN THE USA!

Preamble
• We are going to watch a promotional video from the
garment manufacturing and retail company
American Apparel
• Things to watch for:
1. What makes AA different than other clothing
companies?
2. Why do you think they have become so popular?
American Apparel Sewing
5th Floor AA Sewing
Wrap Up For the Day
Will Be…

 Listing ALL FOUR Factors of Production
 Explain the process of production identifying all the
components (pieces of production)
Production
So how do we get all
this “stuff” that we
have to decide about?
Decisions, decisions
…
PRODUCTION, cont.

 Production is how
much stuff an
individual, business,
country, even the
WORLD makes.
 But what is “STUFF”?
 STUFF – Goods and
Services.
 Goods – tangible (you
can touch it) products
we can buy
 Services – work that is
performed for others
Goods & Services

Goods
Services
Factors of Production
So, what do we need to make all of this Stuff?
4 Factors of Production

LAND
Water, natural gas, oil,
trees (all the stuff we
find on, in, and under
the land
LABOR
Physical and Intellectual
 Labor is human
power
4 Factors of Production

CAPITAL
- Tools, Machinery,
Factories
 Human capital is
brainpower, ideas,
innovation
ENTREPRENEURS
 Investment $$$
 The risks of investing
Which Factor of
Production is it?

Which Factor of
Production is it?

Which Factor of
Production is it?

Which Factor of
production is it?

THREE parts to the Production
Process

Factors of Production – what we need to make
goods and services
Producer – company that makes goods and/or
delivers services
Consumer – people who buy goods and services
(formerly known as “stuff”)
What’s the
relationship like?
Production Process

Land
Goods
Labor
Production/Manufacturing
“Factory”
Consumers
Capital
Services
Entrepreneurship
Capital Goods & Consumer Goods
Capital Goods: are
used to make other
goods
Consumer Goods:
final products that are
purchased directly by
the consumer
CHANGES IN
PRODUCTION
Division of Labor –
different people
perform different jobs
to achieve greater
efficiency (assembly
line).
You do your
job, and I will
do my Job and
we will be
more
EFFICIENT
CHANGES IN PRODUCTION
 Consumption – how
much we buy
(Consumer Sovereignty
[control])
The DELL store is
empty because….
Everyone is at the
APPLE STORE!!!
Can you identify what problem
Dell has in this scenario?
Choices that Dell has to
make

 With your jedi partner, take 3 mins to brainstorm
what options does Dell have if the Apple store is as
full as seen in the pic before
 Let’s bring these out to the floor…
Dell can do what lots of American companies have been
doing for quite some time… OutsourcingThe practice of companies sending production to other
countries where materials and labor are cheaper = this
reduces costs for companies = can charge less for
goods/services… = what choices will consumer make?
What outsourcing looks like in
21st century

Carrier-An American
AC/Heater company
Indian manufacturing
workers
Is outsourcing good or bad for
Americans?

 We Will be watching an episode of the TV show 30
days by Morgan Spurlock (Supersize Me)
 Pay attention to the choices that tech companies have
made
 How do these choices impact American workers?
Indian workers?
 What are the trade offs and opportunity costs of
outsourcing?
Practice with Factors of
Production
Land
Open field of grass where the cows graze
Labor
-Farmer who milks cows
-Cheese maker
-Packaging
-Delivery
Capital
-Milking tools
-Farm
-Containers, etc.
Entr.
-Money
-Ideas
-Experience on cow farming and cheese making
Wrap Up For the Day!

 List & Describe ALL FOUR Factors of Production
 Explain the process of production identifying all the
components (pieces of production)
(The Three parts of production & the visual)
 Do you agree or disagree with the practice of
outsourcing? Explain your rationale- Identify and
discuss the trade offs and opportunity costs of
Outsourcing
Can you do the
following?...

 Define Scarcity & provide examples
 Define Trade Offs & provide examples
 Define Opp Cost & provide examples
 Explain why and how choice is impacted by all THREE
above
 List ALL four Factors of Production with example for
each
 Explain the production process (the diagram) with the
THREE components
 Discuss how outsourcing works, the trade offs, and
opportunity costs of this business practice