What is
Economics?
Chapter One
TINSTAAFL
 What
do these letters stand for?
THERE IS NO SUCH THING AS A FREE LUNCH
The more a business gives away for “FREE” it
must make up for by charging higher prices
for other items
Free?
 Think
of an example of a supposedly
“free” item that you see everyday.
 Explain why the item is not really free by
stating who or what actually pays for it.
Answer the question…
If you could make a small change in your
daily routine that would save you time and
money, would you make the change?
Why or why not?
Define Scarcity…
Scarcity… the fundamental
economic problem…
…the condition that arises because society
does not have enough resources to
produce all the things people would like to
have.
SCARCITY
Is scarcity caused by a shortage of money??
Warm Up #11 - Scarcity
 How
does scarcity affect your life?
 Provide several examples of items you
have had to do without because limited
resources could not keep up with your
wants.
4 Factors of Production
 Resources
used in the production of
goods and services
1. Land
2. Labor
3. Capital
4. Entrepreneurship
LAND
 “gift
of nature” or natural resources
 Resources no created by human effort
 Limited in supply
CAPTIAL
 Tools,
equipment and factories used in
production
 Financial capital- money used to buy
tools and equipment for production
LABOR
 People
with all their efforts, abilities, and
skills.
 All people involved in production except
entrepreneurs (owners)
 The amount of this resource
can vary over time
ENTREPRENEURSHIP
 Entrepreneur:
a risk-taker in search of
profits
 Driving force in the American economy
 Their initiatives combine other 3 factors;
land, labor and capital
Warm Up #13 – 9/22/14
Create a product or service…
 You
must list one example of each factor
of production you will need to create your
product or service.
 Diamond Ring




Land: Diamond
Capital: diamond cutter/polisher
Labor: Gemologist
Entrepreneurship: Diamond distributor
Three Basic Questions…
 are
used by society to decide how to best
use limited resources
1.
2.
3.
What To Produce?
How To Produce?
For Whom to Produce?
WHAT TO PRODUCE??
 Should
society produce more consumer
goods like clothing and food or military
equipment like airplanes and submarines?

GUNS v. BUTTER
 Society
cannot produce enough for all
wants so it must decide…
HOW TO PRODUCE??
 Most
efficient, cost effective way to
produce goods/services
 Assembly line v. less equipment more
workers

Which is better?
FOR WHOM TO PRODUCE?
 How
will produced items be allocated?
 Pricing, location and availability usually
determine who while receive these items
 BMW
automobile?
 Low-income housing?
 Old Navy jeans?
ECONOMICS
 the
study of how a society produces,
distributes and consumes its limited
resources with unlimited wants.
WARM UP #14- 9/23/14
Write a brief description of the American
economic system as YOU see it using the
concepts of :
SCARCITY
FACTORS OF PRODUCTION
3 BASIC QUESTIONS.
Trade-offs and
Opportunity
Costs
What’s wrong with this picture?
What’s wrong with this picture?
What’s wrong with this picture?
Trade-offs
 Alternative
choices when spending your
income or time.
Alternatives
CRITERIA
$75 or
Less?
Durable?
Will Parents
approve?
Can use
any time?
Several CDs
yes
yes
yes
no
Concert Tix
no
no
maybe
no
Soccer Ball
yes
yes
yes
no
Jeans
yes
yes
yes
yes
Opportunity Cost
 The
cost of the next best alternative use of
money, time or resources when one
choice is made rather than another.
 Example:


based on earlier chart
Chose jeans so not enough money left for
next best option – soccer ball
Opportunity cost of jeans was soccer ball
Warm Up #15- 9/24/14
 Explain
trade-off and opportunity cost in
your own words and then give an
example.
Create your own …
 Decision
Making Grid
 Must determine 3 alternatives and total
amount of money you can spend along
with 2 other criteria…
Alternatives
Criteria
$___ or less
??
??
1.
2.
3.
Determine your choice and the opportunity cost of your choice.
Warm Up #16 – 9/26/14
If the United States was in the midst of a
large scale war, how might the government
decide to allocate(use) its resources?
More consumer goods (butter) or military
goods (guns)?
Explain your answer.
Production Possibilities Frontier
A
diagram representing various
combinations of goods and/or services an
economy can produce when all
resources are fully employed.

Using the same materials/resources, the
company needs to decide how much
production should go to boats and trucks.
Guns & Butter Example
Trucks v. Boats when all
resources are fully used



What three points
illustrate all resources
are fully used?
What point shows
resources under
used?
What point shows
production greater
than resources?
Opportunity Cost?
 Unfortunately,
the
company had to
layoff workers.
Point D represents
the less number of
workers…so the
opportunity cost is
less workers is 5 less
boat per year.
Create your own…
 Production
Possibilities Frontier for a textile
company that produces jeans and t-shirts.
Jeans
T-Shirts
100
40
75
60
50
70
25
100
0
120
Opportunity Cost?
 What
is the opportunity cost of increasing
production of 20 more shirts?
( Hint: how many less jeans?)
Explain…
 How
opportunity cost is involved when
resources are shifted from the production
of one good to another.
 HOMEWORK:

In your notebook, create a list of 50 things
you find in your home. Please diversify.
Basic Economic
Concepts
Chapter one Section three
Needs v. Wants
 Take
out list of 50 items from your home
and determine which items you NEED and
which items are NICE to a have.
 What


is a NEED v. a WANT?
Need: basic requirement for survival
Want: a means of expressing a need
 Ex.
Food is a need but pizza is a want.
Warm Up #17 – 9/29/14
Review your Journal and be sure you have correct entries
for the following warm-ups…
#11- Think about a “free” item that you see everyday.
Explain why this items is not really free…
#12- How does scarcity affect your life?
#13- List one example of each factor of production?
#14- Write a brief description of the American economy
using concepts of SCARCITY, FACTORS OF PRODUCTION,
3 BASIC QUESTIONS.
#15- Explain trade-off and opportunity cost in your own
words along with an example.
#16- If US in large scale war, more guns or butter? Explain.
Economic System
 An
organized way of providing for the
wants and needs or their people
 Three



major types of Economic systems:
Traditional Economy
Command Economy
Market Economy
Create the chart in your notebook and
use pages 33-37 to fill it in…
3 economic Weaknesses
questions
Strengths
Traditional
Command
Market
Traditional
-Capable of dramatic
change in short time
Weaknesses
Strengths
-Stable , predictable
and continuous
Command
-Discourages new ideas -Does not meet wants and
-Stagnation and lack of needs of consumers
progress
-lacks incentives
-large bureaucracy
-little flexibility
-discourages new and
different ideas
Market
-able to adjust to
change gradually
-individual
freedom
-less gov’t
interference
-large variety
-consumer
satisfaction
-rewards only
productive
resources
-must guard
against market
failures
3 economic questions
Weaknesses
Strengths
Traditional
Command
-Stable , predictable and
continuous
-Capable of dramatic change in
short time
-Discourages new ideas
-Stagnation and lack of
progress
-Does not meet wants and needs
of consumers
-lacks incentives
-large bureaucracy
-little flexibility
-discourages new and different
ideas
What? Based on
tradition
How? Same as past
For Whom? Customs
and traditions of
sociey
Market
-able to adjust to
change gradually
-individual freedom
-less gov’t interference
-large variety
-consumer satisfaction
-rewards only
productive resources
-must guard against
market failures
What? Central
authority (govt)
What?
Individuals
(consumers and
How? Central authority producers)
For Whom? Central
Authority
How? Individuals
For Whom?
Individuals
Assessment:
 Create
three illustrations or comic strips
that demonstrate the basic components
of each of the economic systems.
 Once
illustration or comic strip per
economic system.
 Complete
for HW and turn in tomorrow…
Chapter One Review
 Homework:
book pgs. 28 and 29
 Complete the following questions in your
notebook


Reviewing Key Terms #1-10
Reviewing Facts #s 1-3, 5-7, 8-9, 11-12