Scarcity

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					   Unit I: Scarcity


Learning How to Think Like
      an Economist
Basic Economic Assumptions

 Economics is the study of scarcity
  and choice
 To be scarce something must be
  both limited and desirable
 Scarce goods/services have a
  cost (not necessarily a price)
More Assumptions

 Scarcity  means that there are
  limited resources for our unlimited
  wants and desires
 Choices involve an “opportunity
  cost.”
 Opportunity costs are the cost of
  the best rejected alternative
Last Economic Assumption!

  Ceteris
         Paribus
  OTBE _ Other Things Being
   Equal
  What   does that mean?
  Filter out all other possible factors that
   could affect outcome….Yabuts ! No
   “What Ifs….” ?
Essential Question for Unit 1:

    How do we get our
    unlimited wants and
   needs met given limited
        resources ?
What is Economics?

   Economics    is the study of
       how society produces,
     manages, distributes and
      consumes our scarce or
    limited resources to satisfy
      our unlimited wants and
               needs
Why is Economics Taught in the
Social Studies Department?
  It’sa social science !
  Economics is a social science
   because it examines the behavior of
   individuals – given the fact that
   decisions must be made because of
   limited resources and unlimited
   wants and desires
Macroeconomics

 Macroeconomics
  deals with the
  economy as a whole
  and is concerned
  with an overview of
  the economy
 Macroeconomics
  examines the forest,
  the whole ecosystem
    Microeconomics
 Microeconomics deals
  with specific economic
  units and detailed
  analysis of each unit of
  the economy
 Microeconomics
  examines the tree –
  not the whole forest
Economics has a “content” vocabulary

  Demand vs. Quantity Demanded
  Supply vs. Quantity Supplied
  Determinants of Demand
  Nominal GDP vs. Real GDP
  Price Elasticity
  Production Possibilities Model
  Productive Efficiency
  Multiplier Effect
What are goods and services?
                       Consumer Goods
                              or
                       Durable Goods ?
What are Services?

    Dentist
                        Hair Stylist




              Teacher
How does a society
decide what goods
and services should
  be produced ?
 It depends on the
kind of society and
  how the society
  answers these 3
     questions !
What goods and services
are to be produced ?
 How are these goods and
services to be produced ?
Who get the goods and
services once they are
produced ?
  Each of these societies will
answer the questions differently



Fidel and Raul          Nordic Countries
 Click on picture           Norway
                            Sweden



            President
             Barack
             Obama
Given limited resources, how do
these societies make economic
         decisions ? ? ?
Often based on their Social Goals

  Economic Growth
  Economic Freedom
  Economic Stability (Price Stability)
  Economic Justice
  Economic Security
  Economic Efficiency
      Allocative Efficiency- right place at right time
      Productive Efficiency – getting more for less
Allocative Efficiency




      An Allocative Efficiency Failure : building
      materials were not there when needed !
Productive Efficiency




  DynaWash® Three Pocket Endloading Washer-Extractors
   Functionally designed for highest productive efficiency
                  and operating economy.
What Does it Take to Produce
Goods and Services ?
  The  ingredients that go into
   producing goods and services called
   Factors of Production and are in
   limited supply:
    Human   Resources
    Natural Resources

    Capital (Physical and Human)

    Entrepreneurship (aka Management)
Human Resources
                       Natural
                      Resources

North Sea Oil




                    Clean   Tropical
                    Water    Fruits
Beautiful weather
Capital Resources:

 Capital  is any resource that is
   used to create other goods
   and/or services
            Capital
    Physical

    Human Capital
Physical Capital
Human Capital

    Human capital:
        Creativity
        Intelligence
        Skills
        Education
 Examples of human capital:
   “Think tanks” such as
  Brookings Institution
  Heritage Foundation
Entrepreneurship




              Bill Gates
    Richard
                           Mary Kay Ash
    Branson
How can you get all your wants and
needs met ?
  You can’t ! You must make choices
   given limited resources (factors of
   production) and unlimited needs and
   desires
  Choices involve opportunity costs
  Law of Increasing Costs applies to
   choices and resulting opportunity costs
        Opportunity costs are not equal (i.e. units
         given up and gained are not equal)
What does a Production Possibilities
        Model Look Like ?
                                 “Bowed”
                                  out look
                                shows that
                                 there are
                                increasing
Guns




                                   costs
                                associated
                                with choice
                                  (law of
                                increasing
                                  costs!)
                Butter
Bullet Trains or Space Missions ?
Law of Increasing Costs
                                    Not
                                  possible
                                   OTBE




                          Any movement
                            along curve
                            illustrates a
                          sacrifice of one
                           in favor of the
                              other (the
 inefficient                opportunity
                                cost)
Why are decisions made at the
“margin”?
You  have to weigh the additional
 (or marginal) benefit versus the
 additional (or marginal) cost of
 each choice. It is never a one-to
 one correlation….and, this is
 why those decisions are difficult
 to make.
Is it ever possible to have
more guns AND butter ?


           YES !
Movement OF the Curve !

                      Economic Growth –
                        (more guns and
                          more butter
Guns




             Butter
  How is it possible to get more
    “guns” AND “butter” ?

 Increase one or more of the
 factors of production:
  Human   Resources
  Natural Resources

  Capital (Human and/or Physical)
    Technology   is often biggest factor !)
  Entrepreneurship     (Management)
                   Production
              Possibilities Curve for
                       GAP
T-shirts




           Jeans
Humphrey Hawkins Act

  Actmandates that the
  government should enact
  policies that promote:
    Economic   growth of 3%
    Price Stability of 3%

    Promote maximum employment
      ( 5% or <)
Circular Flow Model

				
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posted:8/4/2011
language:English
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