Unit 1
Unit 1:
Basic Concepts
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Unit 1
Unit I
[7 days]
SECTIONS
Basic Concepts
1. Scarcity and Opportunity Costs
2. Production Possibilities
3. Trade and Specialization
Enduring understandings
Students will take away from this unit the following understandings:
1) All resources (i.e. land, labor, capital, and entrepreneurship) are scarce, forcing societies to make
economic decisions.
2) Any economic decision results in an opportunity costs and trade-offs.
3) Production possibilities curves demonstrate efficiency, growth, and marginal costs and benefits.
4) Production and consumption increase when individuals, businesses and governments specialize in what
they can produce at the lowest opportunity cost and then trade.
Key Vocabulary:
need
want
economics
Goods
services
scarcity
Shortage
factors of production
trade-off
opportunity cost
marginal benefit
marginal cost
thinking at the margin
production possibilities curve
production possibilities frontier
Efficiency
underutilization
cost
law of increasing cost
export
import
absolute advantage
comparative advantage
law of comparative advantage
Skills Focus:
Students will be able to:
• Explain why limited productive resources and unlimited wants result in scarcity, opportunity costs
and trade offs for individuals, businesses, and governments.
• Define opportunity cost as the next best alternative given up when individuals, businesses and
governments confront scarcity by making choices.
• Give examples of how rational decision making entails comparing the marginal benefits and the
marginal costs of an action.
Explain that rational decisions occur when the marginal benefits of an action equal or exceed the
marginal costs.
• Illustrate by means of a production possibilities curve the trade offs between two options.
• Define and distinguish between absolute advantage and comparative advantage.
• Explain that most trade takes place because of comparative advantage in the production of goods
and services.
Prerequisites:
SS2E1 The student will explain that because of scarcity, people must make choices and incur opportunity
costs.
SS3E1 The student will describe the four types of productive resources:
SS3E3 The student will give examples of interdependence and trade and will explain how voluntary
exchange benefits both parties.
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Unit 1
SS4E1 The student will use the basic economic concepts of trade, opportunity cost, specialization,
voluntary exchange, productivity, and price incentives to illustrate historical events.
SS5E1 The student will use the basic economic concepts of trade, opportunity cost, specialization,
voluntary exchange, productivity, and price incentives to illustrate historical events.
Connections:
Mathematics:
Production possibilities curves relate well to the concept of graphing points on a plane.
Absolute and comparative advantage utilizes the math skill of multiplying and dividing fractions.
English:
Choices made by characters in books read in English illustrate the concept of opportunity costs.
Reading skills acquired in Language Arts are vital to understanding concepts in book.
Science:
Natural resources as discussed in Biology, Earth system, and Environmental Science classes are a type of
productive resource.
Marketing:
In Marketing Principles, students learn about the types of economic resources and other basic economic
principles.
Suggested Performance Assessment:
Students will create booklets that explain the concepts of productive resources, opportunity costs, marginal
costs and benefits, production possibilities, and trade.
Booklets will be structured as a welcome booklet for new employees at a fictional company. The welcome
booklet will address the listed concepts by explaining the following things about the company: what the
company produces or what it could produce (opportunity costs), what resources it uses in production
(productive resources), how much of the product it produces and why it produces that amount (marginal
costs and benefits), what the company could make if it didn’t make its product (production possibilities),
and how the company and its products fits into the global economy (trade and specialization).
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Unit 1
Unit I
Basic Concepts
SECTION 1
Scarcity and Opportunity Costs
Aim: 1 of 3: How do limited productive resources and unlimited wants
results in scarcity?
SSEF1A Define scarcity as a basic condition that exists when unlimited
wants exceed limited productive resources
Key Vocabulary:
Need, want, economics, goods, services, scarcity
Content Expectation: The student will understand that…
• limited productive resources and unlimited wants result in scarcity, opportunity costs
and trade offs for individuals, businesses, and governments.
Core Text:
Prentice Hall, Economics pp 2 – 4
Skills Focus Instructional Strategy:
(Warm Up) Ask students to name some of the goods and services that they have brought over the past few
days. Make a list on the board as these products on the board. Then ask students to list the choices they
made when deciding to buy these products (reasons for the purchases). Next, ask students which of the
choices listed might be considered economic choices. Guide students in their responses to help them
understand the meaning of the term economics.
Other Instructional Suggestions:
• (Lecture/Discussion) Discuss with students what they already know about the subject of economics.
Suggest that they may be familiar with economic ideas, even if they do not know them as such.
• (Power Point Presentation) Chapter 1-Section 1
• (Lesson Plan) Use sample lesson plan “Scarcity” (Unit 1 Supplemental Materials #1)
• (Lesson Plan) Use sample lesson plan “Economic Choices”. This lesson emphasizes the concepts
of scarcity and choice. People engage in economizing behavior; consciously or tacitly, they weigh
the relative benefits and costs of each alternative and try to choose the one that will provide them
with the greatest net benefits. This activity helps students to identify alternatives and anticipate
their associated costs and benefits; it also requires them to make choices among given alternatives.
• (Unit 1 Supplemental Materials #2)
• (Wrap Up Question) What basic economic problem do both higher-income nations and lowerincome nations have in common?
a. too many unskilled laborers
b. lack of capital goods
c. too much government
d. scarcity of resources
The answer is d.
• (Lecture Notes)
I. What is Economics?
•
•
Economics is the study of how people make choices to satisfy their wants
For example:
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Unit 1
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–
You must choose how to spend your time
Businesses must choose how many people to hire
II. Scarcity and Opportunity Cost
•
•
Scarcity occurs when there are limited quantities of resources to meet unlimited needs or desires
Shortages occur when producers will not or cannot offer goods or services at current prices
Other Resources:
• Source Articles Folder: High-Tech Homework, pp.3-5.
• Unit 1 Folder: Careers in Economics, Economist, p.11.
• Virtual Economics Disk: Document is Taken From: Capstone: Exemplary Lessons for High
School Economics-Teachers Guide. Unit 1-Lesson 4: To Choose or not to Chose? That is Not the
Question.
Differentiation:
• Honors: Name a scarce resource (remember that all resources are scarce). What choices do people
have to make about their consumption of that resource? How is the consumption of that resource
controlled?
• Remediation: Define scarcity. Use it in five different sentences.
• ELL: Have students copy the section headings and write a paragraph summarizing key information
under each. Have students work in pairs or groups of three to create five questions generalizing the
information and content of the sections. Suggest that the answer to each question involve at least
one of the key terms. Have groups exchange questions and write out answers.
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Unit 1
Unit I
Basic Concepts
SECTION 1
Scarcity and Opportunity Costs
Aim: 2 of 3: What are examples of productive resources such as land
(natural), labor (human), and capital (capital goods)?
SSEF1b Define and give examples of productive resources (e.g., land
(natural), labor (human), capital (capital goods), entrepreneurship
Key Vocabulary:
Scarcity, shortage, factors of production
Content Expectation: The student will understand that…
• limited productive resources and unlimited wants result in scarcity, opportunity costs
and trade offs for individuals, businesses, and governments.
Core Text:
Prentice Hall: Economics, pp. 1 – 6
Skills Focus Instructional Strategy:
(Warm up) Ask students to make a list of the items that comes to mind when they hear the word scarce.
Have students to brainstorm a list of items that they think might be scarce. This will serve as review of the
previous lesson.
Other Instructional Suggestions:
• (Lecture) Presentation Pro-Chapter 1-Section 1
• (Activity) Students are to create a web diagram that shows how entrepreneurs bring together the
factors of production. Tell students to place the word “Entrepreneur” in the central oval and to place
various factors of production in the other ovals. A template of the graphic organizer can be found in
Chapter 1, Section 1 of the Section Reading Support Transparency System. Students should write a
brief description of each factors of production that appears on the graph.
• (Independent Study) Students are to create their own business, becoming entrepreneurs. They are to
write a small business plan outlining the name of the business, the goods or services that they plan to
produce, and their target market. Next students are to make a list of all of the human, capital, and
natural resources that will be needed in order to run their business.
• (Wrap Up Question) Which of the following is an example of an investment in human capital?
a. A company builds a new factory.
b. A state puts in a new highway.
c. A person goes to college.
d. A country builds new schools.
The answer is c
• (Lecture Notes)
The Factors of Productions
•
•
•
Land - All natural resources that are used to produce goods and services.
Labor - Any effort a person devotes to a task for which that person is paid.
Capital - Any human-made resource that is used to create other goods and services.
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Unit 1
Other Resources:
• Learning Styles Lesson Plans folder, Section 1 Lesson Plan, p.7.
• Unit 1 Folder: Careers in Economics, p.11.
• Virtual Economics Disk: The Document Lesson is Taken From-Entrepreneurship in the U.S.
Economy: Teacher Resource Manual. Lesson 5: Making Things Entrepreneurs Sell.
Differentiation:
• Honors: Research the production of a good that the student uses/buys often. Write all the factors of
production that go into making the good.
• Remediation: Draw a chart showing the factors of production used to make a pizza.
• ELL: Have students copy the section headings and write a paragraph summarizing key information
under each. Have students work in pairs or groups of three to create five questions generalizing the
information and content of the sections. Suggest that the answer to each question involve at least
one of the key terms. Have groups exchange questions and write out answers.
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Unit 1
Unit I
Basic Concepts
SECTION 1
Scarcity and Opportunity Costs
Aim: 3 of 3: How is opportunity cost as the next best alternative, given up
when individuals, business, and governments confront scarcity by making
choices?
SSEF1c List a variety of strategies for allocating scarce resources. (1d)
Define opportunity cost as the next best alternative given up when
individuals. Businesses, and governments confront scarcity by making
choices
Key Vocabulary:
Trade-off, opportunity cost
Content Expectation: The student will understand that…
• opportunity cost is the next best alternative given up when individuals, businesses and
governments confront scarcity by making choices.
Core Text:
Economics: Principles in Action – Chapter 1, Section 2 (pp 8-11)
Instructional Suggestions:
• (Warm – Up) Identify five appealing vacation destinations. On a decision making grid, fill in the
benefits of each destination. Tell students that they can choose just one. Ask volunteers to explain
their choices and to describe what they gave up by choosing that vacation over others. Explain that
in this section they will learn about trade-offs.
• (Lecture) From Presentation Pro – Chapter 1, section 2 – Present guiding questions about how we
make decisions. Lecture/discuss bulleted points about the distinction between trade offs and
opportunity costs
• (Visual) Use transparency 1.2 as a visual aid for types of trade-offs.
• (Activity) Using a story everyone should know (a fairy tale, story read for literature, etc.), have
students analyze the story to find examples of opportunity costs and trade-offs. In addition, have
students create their own short stories (real or imagined) that illustrate opportunity costs and tradeoffs. Have students share stories with classmates and have classmates pick out the opportunity costs
and trade-offs in the student-created stories.
• (Article) Have students read and summarize article on opportunity costs (Unit 1 Supplemental
Materials #3)
• (Lecture Notes)
Opportunity Cost
•
•
•
Does every decision you make involve trade-offs?
How can a decision-making grid help you identify the opportunity cost of a decision?
How will thinking at the margin affect decisions you make?
Tradeoffs and Opportunity Cost
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Unit 1
Trade-offs are all the alternatives that we give up whenever we choose one course of action over
others.
The most desirable alternative given up as a result of a decision is known as opportunity cost.
All individuals and groups of people make decisions that involve trade-offs.
Other Resources:
• Passing the Georgia Economics End of Course American Book Company pp 22, 39, 127
• Presentation Pro CD-Rom
• Transparency booklet
Differentiation:
• Honors: Ask students to write a paragraph evaluating a public policy decision (such as one
involving environmental protection or hiring more police for a city) and summarize the information
in terms of opportunity cost and thinking at the margin.
• Remediation: Ask students to write definition in their own words of the term opportunity cost. Ask
them to provide examples of the concepts from their own lives.
• ELL: Have students copy the section headings and write a paragraph summarizing key information
under each. Have students work in pairs or groups of three to create five questions generalizing the
information and content of the sections. Suggest that the answer to each question involve at least
one of the key terms. Have groups exchange questions and write out answers.
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Unit 1
Unit I
Basic Concepts
SECTION 2
Production Possibilities
Aim: 1 of 2: To what extent does rational decision-making entail
comparing the marginal benefits and the marginal costs of an action?
SSEF2a Illustrate by means of a production possibilities curve the trade
offs between two options.
Key Vocabulary:
Marginal benefit, marginal cost, thinking at the margin
Content Expectation: The student will understand that…
• rational decision making entails comparing the marginal benefits and the marginal
costs of an action.
• rational decisions occur when the marginal benefits of an action equal or exceed the
marginal costs.
Core Text:
Economics: Principles in Action – Chapter 1, Section 2 (pp 8-11)
Instructional Suggestions:
• (Warm –Up) List the benefits and costs of one extra hour of study time, two extra hours of time, and
three extra hours of study time. Use the student responses to introduce the idea of marginal cost and
marginal benefit.
• (Lecture) Questions to answer: What is thinking at the margin? Why do we think at the margin?
How do we make effective decision at the margin? Use example from warm-up and other similar
examples to reinforce the idea.
• (Activity) Students come up with posters or transparencies that show the idea of thinking at the
margin for a decision of their own choosing. If creating a chart, it should resemble the Marginal
benefits chart displayed in the text and the Presentation Pro CD-Rom. If creating an illustration, it
should clearly lay out the marginal benefits and costs of each marginal decision. Students should
present posters to class.
• (Lesson Plan) Use sample lesson plan “Making Choices” (Unit 1 Supplemental Materials #8)
• (Lecture Notes)
Examples: Decision Making Grid
• Economists encourage us to consider the benefits and costs of our decisions.
(Use the Karen Decision-making Grid in the textbook page 10 or the Presentation Pro-CD.)
Thinking at the Margin
• When you decide how much more or less to do, you are thinking at the margin. ( Use example
in textbook on page 11)
Other Resources:
• Presentation Pro CD-Rom
Differentiation:
• Honors: Create a marginal decision making chart for a decision of your choice. Based on the chart,
what option would you choose? What is the opportunity cost of making that decision?
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Unit 1
•
•
Remediation: Look at Figure 1.3. Which decision would you make? Why? What is the
opportunity cost of that decision?
ELL: Have students copy the section headings and write a paragraph summarizing key information
under each. Have students work in pairs or groups of three to create five questions generalizing the
information and content of the sections. Suggest that the answer to each question involve at least
one of the key terms. Have groups exchange questions and write out answers.
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Unit 1
Unit I
Basic Concepts
SECTION 2
Production Possibilities
Aim: 2 of 2: How does a production possibility curve illustrate the tradeoffs between two production possibilities and show efficiency, growth,
and cost?
SSEF2B Explain that rational decisions occur when the marginal benefits
of an action equal or exceed the marginal costs.
Key Vocabulary:
Production possibilities curve, production possibilities frontier, trade-off, efficiency, underutilization, cost,
law of increasing cost
Content Expectation: The student will understand that…
• a production possibilities curve illustrates the trade offs between two options
Core Text:
Economics: Principles in Action, pp 13 - 18
Skills Focus Instructional Strategy:
(Warm-up) Have students name two products that a society can produce. Create a Venn diagram of the
resources that are needed to produce both products, and the resources that are only needed to produce each
separate product. Relate the warm-up to the concept of production possibilities (i.e. because shared
resources are needed to produce each product, making more of one product means less resources can be
used to make the other product)
Other Instructional Suggestions:
• (Lecture/Discussion) 1. Explain the concept of a production possibilities curve as a simplified
model of the production choices that a society must make due to scarcity. 2. Relate the shape of a
PPC to the concept of opportunity cost and marginal cost. 3. Explain why a PPC bows outward due
to increasing marginal costs (diagram in book on page 15 explains this concept well). 4. Show how
the points on a PPC illustrate efficient production points, the points inside a PPC illustrate
inefficient production points (due to underutilization of resources), and the points outside of a PPC
illustrate impossible production points unless economic growth occurs. 5. Demonstrate the
difference between moving to a different production point on the PPC and increasing total
production through economic growth.
• (Activity) Worksheet with a blank production possibilities frontier. Have students label the x and y
axis with two products of their choosing (different from the products chosen for the warm-up).
Complete a Venn diagram for the two products such as the one completed as a warm-up. Explain
why the opportunity costs of making one product increases as more of the product is produced
(specific to the products chosen). Explain why society might want to produce at one point on the
PPC versus at another point. Explain what it would take to move production to a point outside of
the PPC (specific example). After students complete the worksheet, take all students through an
example solution, using student input and participation to answer all the questions.
• (Worksheet) Have students complete worksheet on Production Possibilities Curves (Unit 1
Supplemental Materials #4)
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Unit 1
•
(Lecture Notes)
Production possibilities
• What is a production possibilities graph?
• How do production possibilities graphs show efficiency, growth, and cost?
• Why are production possibilities frontiers curved lines?
•
•
Production possibilities curve (graph)
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.
Use examples: fig. 1 & 1.5 pages 14 & 15
Efficiency, growth and cost
• Efficiency means using resources in such a way as to maximize the production of goods and
services. An economy producing output levels on the production possibilities frontier is
operating efficiently.
• Growth If more resources become available, or if technology improves, an economy can
increase its level of output and grow. When this happens, the entire production possibilities
curve “shifts to the right.”
• Cost A production possibilities graph shows the cost of producing more of one item. To move
from point c to point d on this graph has a cost of 3 million pairs of shoes. (Use example fig.
1.5 page 15)
Differentiation:
• Honors: Have students research the changes in production that occurred in the United States during
World War II (for example, changing from producing automobiles to making military vehicles).
Ask them to share their research with the class. Hold a discussion in class about what industries
might change, during a war today.
• Remediation: Have students make a brief outline of the material under the heading “Efficiency,
Growth, and Cost” (pp. 15-17). Each of the three factors should be a major heading with
descriptive information below it.
• ELL: Have students copy the section headings and write a paragraph summarizing key information
under each. Have students work in pairs or groups of three to create five questions generalizing the
information and content of the sections. Suggest that the answer to each question involve at least
one of the key terms. Have groups exchange questions and write out answers.
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Unit 1
Unit I
Basic Concepts
SECTION 3
Trade and Specialization
Aim 1 of 2: Why do individuals, business and governments trade goods and
services?
SSEF3a,b Give examples of how individuals and businesses specialize
Explain that both parties gain as a result of voluntary, non-fraudulent
exchange.
Key Vocabulary:
Absolute advantage, comparative advantage, law of comparative advantage, export, import
Content Expectation: The student will understand that…
• the concepts of absolute and comparative advantage can explain why and how
individuals, businesses and governments trade.
• U.S. imports and exports have an impact on the U.S. and its trading partners
Core Text:
Economics: Principles in Action, pp 441-447
Skills Focus Instructional Strategy:
(Activity) Student groups of four or five skim over the chapter 17, section on resource distribution. After
reading, students then create and perform a three to five minute skit that illustrates how unequal resource
distribution affects trade. (This activity is one of the activities provided on p. 61 of Lesson Plan Resource).
Other Instructional Suggestions:
• (Warm-up) Ask students to list examples of times in which they have traded with other people.
Have students volunteer to explain what motivated them to trade with others. Lead them to
understand that because resources are not allocated equally, trade is necessary to satisfy wants and
needs. This warm-up is suggested on p.441 of the text under bell-ringer.
• (Lecture) Use the Presentation Pro CD-Rom ch. 17, section 1 to introduce the focal point of “Why
Nation’s Trade?” The Presentation Pro will bring up several key questions to kick off the
discussion. Do not go into the absolute and comparative advantage portion of section 1. Absolute
and comparative will be included in tomorrow’s lesson. Discuss how unequal distribution of
resources leads to trade. Help students understand how this distribution of resources helps trading
partners determine which goods and services to produce. The Presentation Pro for this section will
help present key concepts, initiate discussion and review section content for this topic.
Transparencies 17B-U.S. Trade Partners and 17C-U.S. Exports and Imports are good visuals to use
for supporting this lecture.
• (Lesson Plan) Use sample lesson plan “Trade” (Unit 1 Supplemental Materials #7)
• (Guided Reading) Have student complete guided reading questions and discuss (Unit 1
Supplemental Materials #5)
• (Wrap-up) Without trade, what would happen to the economic growth of nations and why? (This
question comes from the close and reteach suggestion on p. 441 in the text).
• (Lecture Notes)
Resource Distribution and Trade (Chart fig. 17.1 page 442)
• Each country of the world possesses different types and quantities of land, labor, and capital
resources.
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Unit 1
• By specializing in the production of certain goods and services, nations can use their
resources more efficiently.
• Specialization and trade can benefit all nations.
Imports and Exports of the United States (fig. 17.5 page 446)
The United States is the world’s largest exporter.
The United States is also the world’s largest importer.
The United States’ main trading partners are Canada, Mexico and Japan.
Trade and Employment
• Workers who lose their jobs due to specialization face three options:
– Unemployment: Inability to adapt and find a new job
– Relocation: Moving to where current skills meet current jobs
– Retraining: Gaining new human capital to meet the demands of specialized labor markets
As nations begin to specialize in certain goods, dramatic changes in the nation’s employment
patterns also occur.
Other Resources:
• Presentation Pro CD-Rom
• Transparency Resource Package
• Text Questions and an activity from the Lesson Plans Resource
• Learning Styles Resource Folder
• Lesson Plan Resource Folder
• The Global Economy folder
• Economic Simulations Booklet
• Math Practice Booklet
Differentiation:
• Honors: Ask students to research and write about the roles played by President Millard Fillmore and
Commodore Matthew Perry in opening Japanese ports to trade with the United States. Have
students answer the following questions in their reports: Why did the United States believe that this
trade was vital to its interests? How did Perry convince the reluctant Japanese to honor his respect?
Was this trade based on mutual need?
• Remediation: Outline the section on pages 441-443 titled “Resource Distribution”.
• ELL: Have students copy the section headings and write a paragraph summarizing key information
under each. Have students work in pairs or groups of three to create five questions generalizing the
information and content of the sections. Suggest that the answer to each question involve at least
one of the key terms. Have groups exchange questions and write out answers.
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Unit 1
Unit I
Basic Concepts
SECTION 3
Trade and Specialization
Aim: 2 of 2: How are the concepts of absolute and comparative advantage
used to explain why and how countries trade?
SSEIN1 Define and distinguish between absolute advantage and
comparative advantage. Explain that most trade takes place because of
comparative advantage in the production of a good or service.
Key Vocabulary:
Absolute advantage, comparative advantage, law of comparative advantage
Content Expectation: The student will understand that…
• most trade takes place because of comparative advantage in the production of goods
and services.
• having a comparative advantage means having a lower opportunity cost in the
production of a good.
Core Text:
Economics: Principles in Action pp. 441- 447
Skills Focus Instructional Strategy:
(Warm-up) Have students read the section titled “comparative advantage” and then answer the question on
bottom page 444, which asks them to restate the law of comparative advantage.
Other Instructional Suggestions:
• (Discussion/lecture) Discuss the definitions of comparative advantage, absolute advantage and law
of comparative advantage. Have students demonstrate comparative and absolute advantage using
opportunity cost.
• (Activity) Have students do activities demonstrating/calculating comparative and absolute
advantage from word problems. Have students apply the concept of comparative advantage to
explain why and how countries trade.
• (Problem) Have students answer the Comparative Advantage problem (Unit 1 Supplemental
Materials #6)
• (Lecture Notes)
Absolute and Comparative Advantage
• A person or nation has an absolute advantage when it can produce a particular good at a
lower cost than another person or nation.
• Comparative advantage is the ability of one person or nation to produce a good at a lower
opportunity cost than that of another person or nation. The law of comparative advantage states
that nations are better off when they produce goods and services for which they have a
comparative advantage in supplying.
Benefits of Trade see Fig. 17.4 page 445.
In this example, both Kate and Carlos benefit from specialization.
Differentiation:
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Unit 1
Honors: Create an example of the opportunity costs of production of two goods for two different
people. Determine who would have the comparative advantage in producing each good.
Remediation: Write the law of comparative advantage. Give an example that illustrates this law.
ELL: Have students copy the section headings and write a paragraph summarizing key information
under each. Have students work in pairs or groups of three to create five questions generalizing the
information and content of the sections. Suggest that the answer to each question involve at least
one of the key terms. Have groups exchange questions and write out answers.
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