1. What did you do to earn some money this summer?
Let’s talk about it….
What did you do to earn some money this summer?
Did you make as much as you wanted to?

2. What did you do to earn some money this summer?
Let’s talk about it….
What did you do to earn some money this summer?
Did you make as much as you wanted to?
NEEDED

3. Focus Activity
When you hear the word ECONOMICS, what are the first ten words that you think of?

4. Chapter 1
What is Economics?

5. Economics:
“The study of how people seek to satisfy their needs and wants by making choices.”
People cannot have everything they NEED and WANT.

6. Needs vs. Wants Needs: things NECESSARY for survival
Wants: things we desire but are NOT ESSENTIAL to survival

7. I need air, food and shelter to survive.
Needs vs. Wants
Give me some examples of your NEEDS and WANTS
I need air, food and shelter to survive.

8. Decision Time…
People in the business world have to decide how many people to employ and how much to produce.

9. The things people do…
Because people act individually, in groups (such as businesses), and through governments, economists study each of these groups. And this includes your specific age group! How many groups to you belong to?

10. People make choices because of Scarcity
Limited quantities of resources to meet unlimited wants
Shortage
A situation in which a good or service is unavailable

11. Scarcity IS NOT THE SAME AS Shortage
Economics is about solving the problem of scarcity

12. Shortages can be temporary or long-term.
Shortages occur when producers will not or cannot offer goods or services at the current prices.
Shortages can be temporary or long-term.

13. What impact will the drought in the Midwest have on our economy?
Let’s talk about it….
What impact will the drought in the Midwest have on our economy?
What have you seen so far?

14. People make choices because of Scarcity
Limited quantities of resources to meet unlimited wants
Shortage
A situation in which a good or service is unavailable

15. Factors of Production
What are they?

16. Factors of Production
Land All natural resources that are used to produce goods and services.
Labor Any effort a person devotes to a task for which that person is paid.
Capital Any human-made resource that is used to create other goods and services.

17. Factors of Popcorn Production

18. Quick Assessment
What is the difference between a shortage and scarcity?
(a) A shortage can be temporary or long-term, but scarcity always exists.
(b) A shortage results from rising prices; a scarcity results from falling prices.
(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.
(d) There is no real difference between a shortage and a scarcity.

19. Quick Assessment
What is the difference between a shortage and scarcity?
(a) A shortage can be temporary or long-term, but scarcity always exists.
(b) A shortage results from rising prices; a scarcity results from falling prices.
(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.
(d) There is no real difference between a shortage and a scarcity.

20. Quick Assessment
What is the difference between a shortage and scarcity?
(a) A shortage can be temporary or long-term, but scarcity always exists.
(b) A shortage results from rising prices; a scarcity results from falling prices.
(c) A shortage is a lack of all goods and services; a scarcity concerns a single item.
(d) There is no real difference between a shortage and a scarcity.

21. Quick Assessment
2. Which of the following is an example of using physical capital to save time and money?
(a) hiring more workers to do a job
(b) building extra space in a factory to simplify production
(c) switching from oil to coal to make production cheaper
(d) lowering workers’ wages to increase profits

22. Opportunity Costs Does every decision you make involve trade-offs?
How can a decision-making grid help you identify the opportunity cost of a decision?
How will thinking at the margin affect decisions you make?

23. Trade-offs and Opportunity Cost
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.
All individuals and groups of people
make decisions that involve trade-offs.

24. The Decision-Making Grid
Economists encourage us to consider the benefits and costs of our decisions.

25. The Decision-Making Grid
Economists encourage us to consider the benefits and costs of our decisions.
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
Wake up early to study
Alternatives
Zach’s Decision-making Grid

26. Thinking at the Margin
When you decide how much more or less to do, you are thinking at the margin.
Options
1st hour of extra study time
2nd hour of extra study time
3rd hour of extra study time
Benefit
Grade of C on test
Grade of B on test
Grade of B+ on test
Opportunity Cost
1 hour of sleep
2 hours of sleep
3 hours of sleep

27. Give me some examples of “Thinking at the Margin”
Now it’s your turn…
Give me some examples of “Thinking at the Margin”

28. What does the expression “Guns or Butter” have to do with trade-offs?
Think about it….
What does the expression “Guns or Butter” have to do with trade-offs?

29. Quick Assessment 1. Opportunity cost is
(a) any alternative we sacrifice when we make a decision.
(b) all of the alternatives we sacrifice when we make a decision.
(c) the most desirable alternative given up as a result of a decision.
(d) the least desirable alternative given up as a result of a decision.

30. Quick Assessment 1. Opportunity cost is
(a) any alternative we sacrifice when we make a decision.
(b) all of the alternatives we sacrifice when we make a decision.
(c) the most desirable alternative given up as a result of a decision.
(d) the least desirable alternative given up as a result of a decision.

31. Quick Assessment
2. Economists use the phrase “guns or butter” to describe the fact that
(a) a person can spend extra money either on sports equipment or food.
(b) a person must decide whether to manufacture guns or butter.
(c) a nation must decide whether to produce more or less military or consumer goods.
(d) a government can buy unlimited military and civilian goods if it is rich enough.

32. Quick Assessment
2. Economists use the phrase “guns or butter” to describe the fact that
(a) a person can spend extra money either on sports equipment or food.
(b) a person must decide whether to manufacture guns or butter.
(c) a nation must decide whether to produce more or less military or consumer goods.
(d) a government can buy unlimited military and civilian goods if it is rich enough.

33. Quick Assessment
2. Economists use the phrase “guns or butter” to describe the fact that
(a) a person can spend extra money either on sports equipment or food.
(b) a person must decide whether to manufacture guns or butter.
(c) a nation must decide whether to produce more or less military or consumer goods.
(d) a government can buy unlimited military and civilian goods if it is rich enough.

34. Entrepreneurs
Ambitious leaders who combine land, labor, and capital to create and market new goods and services.

35. It’s all about Greed!
“The problem of social organization is how to set up an arrangement under which greed will do the least harm, capitalism is that kind of a system.” Milton Friedman
As we move along, here is Part 1 of “Greed” by John Stossel
As we move along, here is Part 2 of “Greed” by John Stossel

36. LeBron James
Lisa Leslie

37. LeBron James
$53 Million
Lisa Leslie
$6 Million

38. LeBron James
$53 Million
$6 Million
Lisa Leslie

39. IT’S ALL ABOUT TRADE-OFFS
Individuals: work or free time
Students: study or sleep
Farmers: grow wheat or corn
Merchants: sell shoes or hats

40. OPPORTUNITY COST
When asked how much something costs, people usually answer by giving its price, or money cost.
Economists usually measure cost differently, using what they call opportunity cost, defined as the value of the next best alternative opportunity that is given up in order to do something.

41. OPPORTUNITY COST
Here's how to calculate it. When considering a choice, ask yourself three questions:
1. What alternative opportunities are there?
2. Which is the best of these alternative opportunities? 3. What would I gain if I selected my best alternative opportunity instead of the choice I'm considering?
The answer to the third question is the opportunity cost of the choice.

42. IT’S TIME TO APPLY SOME CONCEPTS…
OPPORTUNITY COST

43. Go to College right away Take a year off after grad.
DECISION MAKING GRID
Alternatives
Go to College
Take a year off
Benefits ?
Decision
Go to College right away
Take a year off after grad.
Opportunity Cost
Benefits forgone

44. ? THINKING AT THE MARGIN Options Benefit Opportunity Cost 1 summer off
1 semester off
1 year off

45. PRODUCTION POSSIBILITIES CURVES
Graphs that show alternative ways to use an economy’s resources

46. PRODUCTION POSSIBILITIES CURVES
The output mix that produces only Good A and zero Good B
The output mix that produces only Good B and zero Good A

47. Efficiency
Efficiency means using resources in such a way as to maximize the production of goods and services. An economy producing output levels on the production possibilities frontier is operating efficiently.

48. PRODUCTION POSSIBILITIES CURVE

49. The Four Factors of Production
Classify the Factors of Production in the following scenario:
You decide to order a pizza to satisfy your wants. First, you picked up the telephone and gave your order to the owner that entered it into her computer. This information came up on the chief baker’s monitor in the kitchen and he assigned it to one of his cooks. The cook was busy mixing dough out of salt, flour, eggs, and milk.
The cook finished mixing dough, washed his hands in the sink, and prepared your pizza using tomato sauce, cheese, and sausage. He then placed the pizza in the oven. Within 10 minutes the pizza was cooked and placed in a cardboard box. The delivery person then grabbed your pizza, jumped in the company car, and delivered it to your door.

50. The Four Factors of Production
Classify the Factors of Production in the following scenario:
You decide to order a pizza to satisfy your wants. First, you picked up the telephone and gave your order to the owner that entered it into her computer. This information came up on the chief baker’s monitor in the kitchen and he assigned it to one of his cooks. The cook was busy mixing dough out of salt, flour, eggs, and milk.
The cook finished mixing dough, washed his hands in the sink, and prepared your pizza using tomato sauce, cheese, and sausage. He then placed the pizza in the oven. Within 10 minutes the pizza was cooked and placed in a cardboard box. The delivery person then grabbed your pizza, jumped in the company car, and delivered it to your door.