Bellwork
1.
2.
What do you expect to learn in Economics?
What is your job as the Economics student?
Cornell Note Taking is
emphasized here at THS
Essential Question: What is Economics?
Questions
Notes
Summary: Economics is the study of how people choose
from limited resources to meet their needs and wants.
Introduction to Economics
1. Scarcity and Factors of Production
2. Opportunity Cost
Essential Question: How do we allocate limited resources?
Making Choices
Need-
something like food, air,
shelter, water (necessary for
survival)
Want- item we desire—not
essential to survival
CAN’T HAVE EVERYTHING YOU
NEED OR WANT—YOU HAVE TO
MAKE CHOICES!!
Essential Question: How do we allocate limited resources?
What Is Economics?


Economics is the study of how people seek to
satisfy their needs (essentials) and wants
(desires) by making choices.
Decisions have costs. Economics studies the
costs, benefits, expectations and results of
choices.
For example:
 You must choose how to spend your time
 Businesses must choose how many people
to hire
Essential Question: How do we allocate limited resources?
Scarcity and Shortages
 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
Scarcity versus Shortage
What is the difference?
•
 ALL GOODS AND
SERVICES PRODUCED
ARE SCARCE.



Can be long-term or
short-term.
Holiday seasons
Wars and droughts
Essential Question: How do we allocate limited resources?
The Factors of Production
 Land
All natural resources that are used to
produce goods and services.
 Labor Any productive physical or mental
effort a person devotes to a task for which
that person is paid. Workers, laborers.
 Capital Any human-made resource that is
used to create other goods and services.
 Physical Capital- machinery and equipment
made by labor to increase the productivity
of labor.
 Human Capital- the knowledge and skills
that makes labor more productive.
Essential Question: How do we allocate limited resources?
The Factors of Popcorn
Production
Land
Labor
Capital
Popping Corn
The human effort needed
to pop the corn
Corn-Popping
Device
Vegetable Oil
Essential Question: How do we allocate limited resources?
The Economic Problem
 What
goods and services should an
economy produce? – should the
emphasis be on agriculture,
manufacturing or services, should it be on
sport and leisure or housing?
 How should goods and services be
produced? – labour intensive, land
intensive, capital intensive? Efficiency?
 Who should get the goods and services
produced? – even distribution? more for
the rich? for those who work hard?
Essential Question: How do we allocate limited resources?
Opportunity Cost
Definition
– the cost expressed in
terms of the next best alternative
sacrificed
Helps us view the true cost of
decision making
Looks at what is given up when a
decision is made.
Implies valuing different choices
Essential Question: How do we allocate limited resources?
FIVE appealing VACATION
Destinations…
Hawaii
Ireland
Paris
Alaska
Dunns River
Falls, Jamaica
Volunteer: What is
your first choice?
What is your second
choice?
Making Economic Decisions
1st
Choice is what you
would choose to do
2nd Choice is your
opportunity cost (you give
it up to do option 1)
Essential Question: How do we allocate limited resources?
How does opportunity cost affect
decision making?
Trade Offs
 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.
 “Time for money and wheels”-get a part time job
(time) in order to get a car
Marginal Thinking
 Process of deciding whether to use a resource
 Cost /benefit analysis-what you will sacrifice
Essential Question: How do we allocate limited resources?
 Economists
encourage us to consider the
benefits and costs of our decisions.
The Decision-Making Grid
Karen’s Decision-making Grid
Alternatives
Sleep late
Wake up early to study
Benefits
• Enjoy more sleep
• Have more energy during the day
• Better grade on test
• Teacher and parental approval
• Personal satisfaction
Decision
• Sleep late
• Wake up early to study for test
Opportunity cost
• Extra study time
• Extra sleep time
Benefits forgone
• Better grade on test
• Teacher and parental approval
• Personal satisfaction
• Enjoy more sleep
• Have more energy during the day
Essential Question: How do we allocate limited resources?
Thinking at the Margin
 When
you
Options
decide how
much more
or lessCost
Benefit
Opportunity
to do, you are thinking at the margin.
1st hour of extra
study time
Grade of C on
test
1 hour of
sleep
2nd hour of extra
study time
Grade of B on
test
2 hours of
sleep
3rd hour of extra
study time
Grade of B+ on
test
3 hours of
sleep
Essential Question: How do we allocate limited resources?
 http://www.youtube.com/watch?v=PSU-
_n81QT0