You plan to open a restaurant that specializes
in meals cooked with organic products. You
realize that location is very important for this
kind of business . You have 2 options: either
rent an expensive site downtown or you can
buy an inexpensive building in a quiet
neighborhood. What are the benefits and the
opportunity cost for each option? Please give
a detailed answer.
Economics
Money Vs Currency
How far does the rabbit hole go???
Using Scarce Resources
Suppose you are moving into your 1st apartment. You have
saved $1200 to use for your purpose. When you go
shopping , you learn that these things are the prices for
things that you have on your list to buy.
Kitchen chairs-$200
TV-$150
Bed-$350
Dishes-$45
Computer-$400
Silverware-$25
Stereo-$300
Towels-$35
Couch-$300
Desk & Chair-$175
Economics
Economics ($) is what
keeps a nation on its
feet. It determines
whether or not a
nation’s people are
educated, well-paid,
fed, healthy, and living
a good life.
Needs…..
Decisions.. Decisions….
Suppose you have $20 to
cover the cost of lunches
for the week. How would
you use the money to
cover your wants Monday
through Friday? How
would buying a late
afternoon snack for $1 on
two of the days affect your
lunch choices?
The Economic Way of Thinking
Scarcity is the situation that
exists because wants are
unlimited and resources are
limited.
Scarcity Leads to Three
Economic Questions:
1. What and How much to
produce
2. How will it be produced?
• societies w/ unskilled
(farming)
• Skilled people use
capital methods
3. How much should people
get? Same , less or more.
• How will it be delivered?
Your turn
1. List 5 wants and tell
why scarcity affects
your wants.
2. How does scarcity
affect consumers?
Producers?
Governments?
3. List 3 economic
questions about the role
of scarcity?
The Factors of Production
Economic resources needed to
produce goods and services
land= Natural resources
Labor= human time, effort….
Capital= machines or people
that produce& distribute goods
& services
Entrepreneurship= putting it
all togeather to sell to
consumer
Your turn
1.
2.
3.
Is entrepreneurship a
gift or can it be
developed. How?
How do you think the
F.O.P were used to
create a product you
recently brought?
Activity on pg# 11, using
scarce resources
Economic Choice Today:
Opportunity Cost
• Economic choices shaped by
Incentives — benefits
that encourage people
to act in certain ways
Utility — benefit or
satisfaction gained from
using a good or service
To make choices, people
economize: make decisions
according to best combination of
costs and benefits
Cost and Benefits
• People motivated by incentives,
expected utility, desire to economize
• They weigh costs against benefits to
make purposeful choices
NO FREE LUNCH:
• All choices have a cost= time, money,
etc…
• Trade-off — usually means giving up
some, not all, of a thing to get more of
another.
Example… working after H.S vs going to
college
Opportunity cost– what will this
opportunity cost me?
Uh-oh….
Trade-off — usually
means giving up some,
not all, of a thing to get
more of another.
Example… working after
H.S vs going to college
Opportunity cost– what
will this opportunity
cost me?
Analyzing Choices
Cost-benefit analysis —
examination of costs,
expected benefits of choices
How Much more time, effort
or money are you willing to
give up? Marginal cost
The rewards or benefits from
this is Marginal benefits
Hard work pays off!!
Your Turn
1.
2.
A website reviewing new CDs
offers you a Free subscription.
All you have to do is complete
a brief online application.
What is the opportunity cost
of this “free offer”? Why do
you think it’s being made?
You are on a limited budget
and planning a 4 day vacation.
Rental car cost $295 the ride
takes 10hr. Plane fare is $150
each way and the ride takes
1hr & 30 min. Conduct a cost
benefit analysis to help you
chose your trip.
Economic models
• simplified representations of
economic forces
• Production possibilities curve (PPC)
is one model that shows maximum
goods or services that can be
produced from limited resources
— also called production
possibilities frontier
• Everything is running @ full
production
• No New Technology can
• improve production
Complete chart on pg 17
PPC Curve
•
•
•
•
Points B & A Efficiency
Resources are used to
the max
Points D –
underutilization?
Law of increasing opportunity cost
— as production switches from
one product to another, more
resources needed to increase
production of second product
U.S accquried new land in 1700’s
thus creating new employment,
technology
Example: Increasing Opportunity
Costs
• Increase in opportunity
cost — each new unit
costs more than last one
• Reasons for increasing
cost of making more of one
product
— need new resources,
machines, factories
— must retrain workers
•Costs paid by making less
and less of other product
Microeconomics and
Macroeconomics
Microeconomics –
small things specific,
individual elements in an
economy
— prices, costs, profits,
competition, consumer and
producer behavior
Microeconomics— combination of all individual
units (big picture)
— Includes consumer,
business, public or government
sectors
Example: inflation
Which category does each item belong.Microeconomics or Macroeconomics. Why?
Study statistics to see how well the
economy is doing at creating jobs or
increasing exports.
Studying statistics on gasoline sales and
hotel bookings to explore the impact of
higher gas prices on vacation plans
Your Turn
Which does each of the news headings relate toMicro or Macroeconomics?
 National Unemployment figures rise
 World Trade Organization Meets
 Shipbuilder Wins Navy Contract
 Cab Drivers on strike
 Gas prices jump 23 cents
Positive Economics and Normative
Economics
Positive economics
— describes and explains economic
behavior as it is. Uses scientific
method-observe data, hypothesize,
test. proved or disaproved
Example.. “I have no money, therefore, I
am broke”
Normative economics
studies what economic behavior
should be
studies facts, asks if course of
action is good
Example.. “I’ll get a job, therefore,
I’ll have money”
Adam Smith: Founder of Modern
Economics
Seeing the Invisible
• An Inquiry into the Nature and Causes of
the Wealth of Nations, 1776
—
challenged mercantilism; argued for free
trade
• Invisible hand guides free marketplace,
benefits sellers and buyers
— people pursue own economic selfinterest
— producers sell at prices that satisfy
What is money?
True wealth is your time and freedom
Money is a tool for trading your time
World has been tricked into using currency instead of real
money.
The Greatest financial crisis EVER!!
» Massive wealth transfer in history
Monetary system is a hoax!!!
HomeWork
The Real Cost of Expanding the O’Hare
Airport
Case Study Pg 32-33
Answers only
Analyze Graphs pg 19-22 ans only
Your Project
Create a new product or service that can be
used today.
Identify the Factors of production need to
manufacture this product or provide the
service.
Create a visual showing how the Factors of
Production would be used.
Chp 1 quiz
1. What term below BEST identifies a person
who makes goods or provides services?
A. consumer
B. customer
C. provider
D. producer
2. Which response BEST explains what area
of people with a large unskilled labor force
will most likely practice?
A. machine-intensive farming methods
B. labor-intensive farming methods
C. machine and labor-intensive farming
methods
D. few intensive farming methods
3. From the choices below, which response is an
example of a trade-off?
A. giving up going to a movie to spend time
shopping
B. giving up going to a movie because it got bad
reviews
C. going to a movie to see your favorite movie
star
D. going to a movie because it got good reviews
4. According to the textbook, a
microeconomist would study which trend?
A. a general decline in prices
B. a rise in tea prices.
C. the ups and downs of business cycles
D. the impact of national tax policies
5. What is true wealth?
a.Time & Money
b.Time & Freedom
c.Time & Gold
d.Time & Education
6. Briefly explain how is wealth transfered?
7. ______ is owned by private
corporation/bankers?
a. Federal Reserve Bank
b. Federal Bank of America
c. Federal American bank
d. Federal reserve corporation
8. Briefly explain the term Fungible as it
relates to currency?
9. Briefly explain the difference between
money & currency?
10. Explain why the narrator claims that gold
and silver are the optimum form of money?
11. Governments create this form of currency
Which also has a 100% failure ratio.
a.Flat
b.Fiat
c.Worthless paper
d.Tissue paper
12. Since the creation of the Federal Reserve
in 1913 the Dollar has ?
a.Maintained it’s value at 100%
b.Lost its value by 95%
c.Lost its value for a while but eventually
gained value by 95%
d.Gained value by 95%
13. Which of these aren’t like the others, also
explain why
14. According to the video, Explain why
governments don’t like to acknowledge gold
as an asset?
15. Currency creation is also known
as____________