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What is Economics_ “Scarcity and Factors of Production”

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					  What is Economics?
“Scarcity and Factors of
     Production”
       Chapter 1.1
   Choices and Decision Making:
• The study of economic begins with the idea
  that people cannot have everything they need
  and want.
• Need: Anything that is necessary for survival.
  (food, shelter…etc.)
• Want: Something we desire, but is not
  essential to our survival.
  (xbox, ipod,…etc.)
           What is Economics?
• Economics: The study of how people satisfy
  their wants and needs by making choices.
• People must make choices due to scarcity.
• Scarcity: limited quantities of resources, and
  unlimited wants. (think of oil)
  -no matter what it is, sooner or later a limit is
  always reached.
  -scarcity always exist because our needs and
  wants are always greater then our supply.
          Scarcity vs. Shortage:
• Shortages: Shortages occur when producers
  will not or cannot offer goods and services at
  current prices.
• Shortages can be temporary or long-term
  (unlike scarcity, which always exists.)
          Goods and Services:
• Many Americans find it difficult to understand
  the idea of scarcity, because when they look
  around they see goods and services all around
  them.
• Good: a physical object. (shoes, shirt)
• Service: actions or activities that one person
  performs for another. (haircut, tutoring)
        Factors of Production:
• These are the resources that are used to
  produce goods and services.
• Land- all natural resources.
• Labor- Task completed by a person who is
  paid.
• Capital- any human made resource that is
  used to produce other goods and services.
  There are 2 different types of capital.
• Physical capital: human made objects used to
  create goods and services. (Tools)
• Human capital: Knowledge and skills a worker
  gains through education and experience.
  (lawyer = education, McDonald’s worker =
  experience or job training)
               Entrepreneurs:
• Entrepreneurs: These are the people who pull
  resources together in order to create goods and
  services.
• Ambitious leaders, usually risk takers, who decide
  exactly how to combine land, labor, and capital
  resources to create new goods and services.
• Develop original ideas, start businesses, and
  create new industries.
• Most importantly, entrepreneurs fuel economic
  growth.
      Entrepreneur Assignment:
1. Tell me what business you are going to start,
   and why you decided on starting that
   business.
2. Need or Want?
3. Good or Service?
4. Human and Physical Capital?
                Bell Work:
• 1. What is the difference between a shortage
  and scarcity?
• 2. What is the difference between a need and
  a want?
• 3. What are the 3 factors of production?
  4.If you hadn’t come to school today, what
  would you be doing instead?
  (Make a list of at least 3 things.)
Opportunity Cost:

       1.2
                Trade-Offs:
• Every decision we make in life involves
  choosing one thing, while giving up another.
• Trade-offs: Trade-offs are all of the
  alternatives we give up when we choose one
  thing over another.
• All decisions involve trade-offs because
  resources are limited. (scarcity)
       Who Makes Trade-Offs?:
• Individuals- more time at work, less time for
  hobbies.
• Businesses- must make decisions on how to
  use land, labor, and capital.
• Society (Countries)- if a country invest more
  money in one thing, it has less money to
  spend on another. (guns or butter decision)
           Opportunity Cost:
• Opportunity Cost: The most desirable thing
  given up in a decision.
• Sometimes making a decision is difficult
  because opportunity cost may be unclear or
  complicated. (Decision Making Grid)
                    Decision Making Grid
                       Alternatives:
                             Sleep Late           Wake Up Early to Study
Benefits:            •-Enjoy more sleep        •-Better grade on test.
                     •-Have more energy        •-Teacher and parental
                     during the day            approval.
                                               •-Personal satisfaction
Decision:                    Sleep Late          Wake up early to study for
                                                          test,
Opportunity Cost:    •Extra study time.        •Extra sleep time.
Benefits Lost:       •-Better grade on test    •-Enjoy more sleep.
                     •-Teacher/parental        •-Have more energy during
                     approval.                 the day
                     •-Personal satisfaction
        Thinking at the Margin:
• Thinking at the Margin: When you decide
  how much more or less to do, you are thinking
  at the margin.
(Decision: study 1, 2, or 3 hours extra for a test.)
 Making a Decision at the Margin:
• Making a decision at the Margin: When you
  look at the opportunity cost and the benefit of
  a decision, you are making a decision at the
  margin. (Decision: Study 1, 2, or 3 hours extra
  for test.)
• Opportunity Cost: Less time to spend with
  friends.
• Benefit: Passing the test
          Writing Assignment:
• On lined paper, tell me about an important
  decision you have made in your life.
• 1. Tell me in great detail about the decision
  you made.
• 2. Tell me some of the trade-offs of your
  decision.
• 3. Tell me the opportunity cost
• 4. Was it worth it?
                 Bell Work:
• 1. What does the “Guns and Butter Decision”
  refer to ?
• 2. What is the difference between trade-offs
  and opportunity cost?
• 3. What is the difference between scarcity and
  a shortage?
   Production Possibilities Graph:
• -Economist often use graphs to analyze the
  choices and trade-offs that people make
• -Why? Because graphs help us see how one
  value relates to another.
• -Production possibility graph: Shows the
  alternative ways to use an economy’s
  resources
         30_
                                                  - Currently
         25_                                      Unachievable


         20_
Shirts




         15_              - Underutilization


         10_


         5_
               5_



                    10_




                                15_




                                          20_



                                                25_


                                                       30_
                             Shoes
                    Shifts in the Production Possibility Curve:
         30_


         25_



         20_
Shirts




         15_


         10_


         5_
               5_




                                     15_




                                                      25_


                                                             30_
                          10_




                                              20_



                                Shoes
        What the Graph Shows:
• 1. Efficiency- using resources in such a way as
  to maximize the production or output of
  goods and services.
• 2. Growth-Increases in technology will cause
  output to increase.
• 3. Cost-The opportunity cost of producing one
  good over another.
        Law of Increasing Cost:
• Law of increasing cost: As production
  switches from one item to another, more and
  more resources are necessary to increase
  production of the second item.

				
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posted:2/17/2013
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