Goals – The students will understand: 1. Scarcity and its impact on economics. 2. Wants and needs and the impact on economics. 3. Rationing and give examples. 4. The three economic questions. 5. The definition of economics. 6. What the Production Possibilities Frontier is. 7. What competition is and why it exists. Definition: The condition in which our wants are greater than the resources available to satisfy those wants. ◦ A need is a basic requirement for survival and includes food, water and shelter. ◦ A want is a way of expressing a need. Since a variety of wants can satisfy a need, wants tend to be broader than needs. People want the things they think will make them happy and satisfied. ◦ ◦ ◦ ◦ Are people’s wants ever fully satisfied? What kinds of things do you want? How do you get what you want? Resources are used to fulfill wants? All resources are limited and come at a cost Scarcity means making choices ◦ Non-material things, e.g., respect/affection, are also scarce Definition: Rationing is the controlled distribution of scarce resources, goods, or services, or an artificial restriction on demand. ◦ A ration is one’s allowed portion of the resource being distributed. Rationing device: some way to decide who gets what portion of all the resources and goods available ◦ E.g., ration coupons from WWII ◦ What are some other forms of rationing? 1. What goods and services should be produced? ◦ Should the economy focus on being self-sufficient or concentrate on what it is good at? ◦ Should it devote resources to health and education or defense and policing? ◦ Should we devote more resources to housing? ◦ Should an economy use resources producing goods that are essentially useless - like 'free' toys in cereal packets, football sticker cards and so on? 2. How should goods and services be produced? ◦ Should the economy use a system that is labor intensive, thereby ensuring everyone who wants a job has one, or should we use more efficient methods of production that involve the use of machines, even if this means more pollution and fewer jobs? ◦ Should we devote more land to production and thus solve some problems of feeding the population at the expense of encroaching into areas of natural beauty? 3. Who should get the resources that the economy has produced? ◦ Should an economy be geared to providing goods and services to every person as equally as possible or should those who work hard get more? ◦ How do we distribute our resources? Goals: Students will understand: ◦ The definition of economics. ◦ What the Production Possibilities Frontier is. ◦ What competition is and why it exists. Write down five questions or statements that you think have something to do with economics. Now share your ideas with the rest of the class. Given the range of comments and issues collected by the group could you now write down a definition of what economics is? The science that studies the choices of people trying to satisfy their wants in a world of scarcity. DEFINITION of 'Production Possibility Frontier - PPF' - A curve depicting all maximum output possibilities for two goods given a set of inputs (resources, labor, etc.). ◦ The PPF assumes that all inputs are used efficiently. When an economy is operating at full capacity it is operating at maximum production. Production possibilities help us understand the concept of opportunity cost, scarcity, and choice. Definition: the rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the marketing mix: price, product, distribution, and promotion. ◦ The effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms. Economists believe that competition exists because of scarcity. If enough resources existed to meet demand, people would not have to compete for goods, services, etc. Why will there always be competition?