1. What is Economics?
Chapter One

2. TINSTAAFL What do these letters stand for?
THERE IS NO SUCH THING AS A FREE LUNCH
The more a business gives away for “FREE” it must make up for by charging higher prices for other items

3. Free?
Think of an example of a supposedly “free” item that you see everyday.
Explain why the item is not really free by stating who or what actually pays for it.

4. Answer the question…
If you could make a small change in your daily routine that would save you time and money, would you make the change? Why or why not? Define Scarcity…

5. Scarcity… the fundamental economic problem…
…the condition that arises because society does not have enough resources to produce all the things people would like to have.
Unlimited Wants
SCARCITY
Limited resources
Is scarcity caused by a shortage of money??

6. Warm Up #11 - Scarcity How does scarcity affect your life?
Provide several examples of items you have had to do without because limited resources could not keep up with your wants.

7. 4 Factors of Production
Resources used in the production of goods and services
1. Land
2. Labor
3. Capital
4. Entrepreneurship

8. LAND “gift of nature” or natural resources
Resources no created by human effort
Limited in supply

9. CAPTIAL Tools, equipment and factories used in production
Financial capital- money used to buy tools and equipment for production

10. LABOR People with all their efforts, abilities, and skills.
All people involved in production except entrepreneurs (owners)
The amount of this resource can vary over time

11. ENTREPRENEURSHIP Entrepreneur: a risk-taker in search of profits
Driving force in the American economy
Their initiatives combine other 3 factors; land, labor and capital

12. Warm Up #13 – 9/22/14 Create a product or service…
You must list one example of each factor of production you will need to create your product or service.
Diamond Ring
Land: Diamond
Capital: diamond cutter/polisher
Labor: Gemologist
Entrepreneurship: Diamond distributor

13. Three Basic Questions…
are used by society to decide how to best use limited resources
What To Produce?
How To Produce?
For Whom to Produce?

14. WHAT TO PRODUCE??
Should society produce more consumer goods like clothing and food or military equipment like airplanes and submarines?
GUNS v. BUTTER
Society cannot produce enough for all wants so it must decide…

15. HOW TO PRODUCE??
Most efficient, cost effective way to produce goods/services
Assembly line v. less equipment more workers
Which is better?

16. FOR WHOM TO PRODUCE? How will produced items be allocated?
Pricing, location and availability usually determine who while receive these items
BMW automobile?
Low-income housing?
Old Navy jeans?

17. ECONOMICS
the study of how a society produces, distributes and consumes its limited resources with unlimited wants.
WARM UP #14- 9/23/14
Write a brief description of the American economic system as YOU see it using the concepts of :
SCARCITY
FACTORS OF PRODUCTION
3 BASIC QUESTIONS.

18. Trade-offs and Opportunity Costs

19. What’s wrong with this picture?

20. What’s wrong with this picture?

21. What’s wrong with this picture?

22. Trade-offs Alternative choices when spending your income or time.
Alternatives
CRITERIA
$75 or Less?
Durable?
Will Parents approve?
Can use any time?
Several CDs
yes no
Concert Tix
maybe
Soccer Ball
Jeans

23. Opportunity Cost
The cost of the next best alternative use of money, time or resources when one choice is made rather than another.
Example: based on earlier chart
Chose jeans so not enough money left for next best option – soccer ball
Opportunity cost of jeans was soccer ball

24. Warm Up #15- 9/24/14
Explain trade-off and opportunity cost in your own words and then give an example.

25. Create your own … Decision Making Grid
Must determine 3 alternatives and total amount of money you can spend along with 2 other criteria…
Alternatives
Criteria
$___ or less ?? 1. 2. 3.
Determine your choice and the opportunity cost of your choice.

26. Warm Up #16 – 9/26/14
If the United States was in the midst of a large scale war, how might the government decide to allocate(use) its resources? More consumer goods (butter) or military goods (guns)? Explain your answer.

27. Production Possibilities Frontier
A diagram representing various combinations of goods and/or services an economy can produce when all resources are fully employed.
Using the same materials/resources, the company needs to decide how much production should go to boats and trucks.

28. Guns & Butter Example

29. Trucks v. Boats when all resources are fully used
What three points illustrate all resources are fully used?
What point shows resources under used?
What point shows production greater than resources?

30. Opportunity Cost?
Unfortunately, the company had to layoff workers. Point D represents the less number of workers…so the opportunity cost is less workers is 5 less boat per year.

31. Create your own…
Production Possibilities Frontier for a textile company that produces jeans and t-shirts.
Jeans
T-Shirts
100 40 75 60 50 70 25
120

32. Opportunity Cost?
What is the opportunity cost of increasing production of 20 more shirts?
( Hint: how many less jeans?)

33. Explain…
How opportunity cost is involved when resources are shifted from the production of one good to another.
HOMEWORK:
In your notebook, create a list of 50 things you find in your home. Please diversify.

34. Basic Economic Concepts
Chapter one Section three

35. Needs v. Wants
Take out list of 50 items from your home and determine which items you NEED and which items are NICE to a have.
What is a NEED v. a WANT?
Need: basic requirement for survival
Want: a means of expressing a need
Ex. Food is a need but pizza is a want.

36. Warm Up #17 – 9/29/14
Review your Journal and be sure you have correct entries for the following warm-ups… #11- Think about a “free” item that you see everyday. Explain why this items is not really free… #12- How does scarcity affect your life? #13- List one example of each factor of production? #14- Write a brief description of the American economy using concepts of SCARCITY, FACTORS OF PRODUCTION, 3 BASIC QUESTIONS. #15- Explain trade-off and opportunity cost in your own words along with an example. #16- If US in large scale war, more guns or butter? Explain.

37. Economic System
An organized way of providing for the wants and needs or their people
Three major types of Economic systems:
Traditional Economy
Command Economy
Market Economy

38. Create the chart in your notebook and use pages 33-37 to fill it in…
Traditional
Command
Market
Strengths
Weaknesses
3 economic questions

39. Traditional
Command
Market
Strengths
-Stable , predictable and continuous
-Capable of dramatic change in short time
-able to adjust to change gradually
-individual freedom
-less gov’t interference
-large variety
-consumer satisfaction
Weaknesses
-Discourages new ideas
-Stagnation and lack of progress
-Does not meet wants and needs of consumers
-lacks incentives
-large bureaucracy
-little flexibility
-discourages new and different ideas
-rewards only productive resources
-must guard against market failures

40. What? Based on tradition
Traditional
Command
Market
Strengths
-Stable , predictable and continuous
-Capable of dramatic change in short time
-able to adjust to change gradually
-individual freedom
-less gov’t interference
-large variety
-consumer satisfaction
Weaknesses
-Discourages new ideas
-Stagnation and lack of progress
-Does not meet wants and needs of consumers
-lacks incentives
-large bureaucracy
-little flexibility
-discourages new and different ideas
-rewards only productive resources
-must guard against market failures
3 economic questions
What? Based on tradition
How? Same as past
For Whom? Customs and traditions of sociey
What? Central authority (govt)
How? Central authority
For Whom? Central Authority
What? Individuals (consumers and producers)
How? Individuals
For Whom? Individuals

41. Assessment:
Create three illustrations or comic strips that demonstrate the basic components of each of the economic systems.
Once illustration or comic strip per economic system.
Complete for HW and turn in tomorrow…

42. Key Terms Consumer: Consumption: Value: Utility: Wealth: Good:
Durable good:
Nondurable good:
Service:
Production:
Productivity:
Specialization:
Division of labor:
Human capital:
Consumer:
Consumption:
Value:
Utility:
Wealth:

43. Key Terms Free products: So plentiful no one could own them: air, sun
Economic products:
Goods and services that are useful, relatively scarce and transferable to others
Good:
Tangible commodity = book or car
Durable good:
Last 3 years or more when used on a regular basis
Washer and dryer
Nondurable good:
Item that lasts less than 3 years when used on regular basis
Service:
Work that is performed for someone
Haircut, home repairs

44. Conspicuous consumption: Value: Paradox of Value: Utility:
Consumer:
People who use goods and services to satisfy wants and needs
Consumption:
The process of using up goods and services
Conspicuous consumption:
The use of a good or service to impress others
Value:
A worth that can be expressed in $
Paradox of Value:
Diamond-water paradox…come back to this
Utility:
Capacity to be useful to someone
To have value must be scarce and have utility
Wealth:
Some of economic products that are tangible, scarce, useful and transferable

45. Paradox of Value PARADOX- a statement that seems contradictory
Some essentials have very little value while others have high value; something to do with scarcity
Diamond/water paradox: water is plentiful has little value but diamonds are scarce but have great value

46. Production: Productivity: Specialization: Division of labor:
Process of creating goods and services
Productivity:
Efficient use of productive resources
Specialization:
Productive inputs do whatever task they are able to do best
Division of labor:
Takes place when workers perform fewer tasks more frequently
Human capital:
The sum of skills, abilities, health and motivation of people
Investing it workers helps improve production

47. Economic interdependence
Actions in one part of country or world has economic impact on what happens elsewhere
Cold snap in Florida may affect orange crops which could affect price of oranges and orange juice may become more expensive

48. Circular Flow Model Economic flow of resources and money Components
Markets: place of buying and selling goods
Factor Market: factors of production
Product Market: finished products
Individuals: consumers who use income to purchase goods and themselves as labor
Businesses: purchase factors of production and produce finished products

49. Circular Flow Model

50. Show a product on the circular flow model…
Think of a final product and recreate the circular flow model to represent the production of that specific product.
Example: Orville Redenbacher Popcorn
Be prepared to it in for a formative grade…

51. Chapter One Review Homework: book pgs. 28 and 29
Complete the following questions in your notebook
Reviewing Key Terms #1-10
Reviewing Facts #s 1-3, 5-7, 8-9, 11-12