1. Basic Economics

2. ECONOMICS - “science of scarcity”
-the study of the choices people make in an effort to
Satisfy their unlimited needs and wants from limited
resources.
The science of “Scarcity”

3. Dealing With Scarcity - When There Is Not
Enough For Everyone - Someone Suffers

4. SCARCITY What does Scarcity mean?
A situation in which human wants are greater than the capacity of available resources to provide for those wants.
A situation in which a resource has more than one valuable use
What is the difference between SCARCITY and SHORTAGE?

5. Luxuries V.
NECESSITIES
Gump Household
Food
Clothing
Shelter

6. SCARCE OR NOT
Old economics textbooks with a sign that says “free books, take as many as you want.” The books have been three years.

7. One economics textbook and five students who want to study for test.
SCARCE OR NOT
One economics textbook and five students who want to study for test.

8. SCARCE OR NOT
Petroleum in Japan, a country without its own oil fields and without oil reserves.

9. SCARCE OR NOT
Petroleum in Saudi Arabia, a country with many oil fields and oil reserves.

10. SCARCE OR NOT
Pebbles are taken from a beach to build a walkway in a homeowner’s lawn. No one else wants the pebbles. The pebbles are not necessary for the lake’s ecosystem or animal habitat.

11. 1 .
Economics – the study of the choices people make in an effort to
satisfy their unlimited needs & wants from limited (scarce) resources.
Good is a physical object (tangible) that can be purchased.
[These can be seen and felt – car, book]
Product
Service is useful labor done for a fee (intangible).
[These are activities, not items – lawyer or doctor ] 2
Econ
Consumer
Supplier 3
Producers (suppliers) – people who make goods/svcs.
Consumers – people who buy and use goods/services. 4

12. Mechanic giving car a tune-up
Good or Service?
Mechanic giving car a tune-up
Good
Service

15. Good or Service?
Watch
Good
Service

18. Good or Service?
Watch Repair
Good
Service

21. Good or Service?
Hamburger
Good
Service

22. Right

23. Wrong!

24. Good or Service?
Basketball
Good
Service

25. Right

26. Wrong!

27. Good or Service?
Bicycle
Good
Service

28. Right

29. Wrong!

30. Good or Service?
Hair Cut
Good
Service

31. Right

32. Wrong!

33. Good or Service?
Waste
Management
Garbage Pickup
Good
Service

34. Right

35. Wrong!

36. Good or Service?
Laptop Computer
Good
Service

37. Right

38. Wrong!

39. Scarcity Problem Limited Resources Food, clothing, shelter,
Mercedes, mansion, PS4,
jewelry, iPod, projector, digital camera,
good health, children, camcorder, laptop
warmth, indoor plumbing,
a sense of personal worth, 3D TV,
literacy, higher economics grade,
iPhone 6, FitBit
Land, Labor, Capital, Entrepreneur
Rent, Wages, Interest, Profits
Unlimited Human Wants
Limited Resources
“Need” those first
three to survive.

40. FACTOR OF PRODUCTION Resources used to make all goods and services.
What would you need to make goods or supply services?
CELL
Capital
Entrepreneurs
Land
Labor

41. The Four Factors of Production9 .
Land [natural resources] – Nature’s items
A. In the earth - coal, oil, fossil fuels, etc.
B. On the earth – vegetation and water
C. In the atmosphere – sun, wind, and rain
Land is the starting point of all production.”
Water
Wind
“Gifts of Nature”
Sun
Fossil fuels

42. *Most important resource – 70% of input cost
Labor [human resources] {“effort”}
anyone who works [“paid work”]
[Labor is the “brain-power” and
“muscle-power” of human beings]
A. Physical – pro athletes & lumberjacks
B. Intellectual – ministers, doctors & lawyers 10 .
*Most important resource – 70% of input cost
“Hired Help”

43. Can’t produce anything
Real Capital v. Financial Capital .
REAL CAPITAL
[tools, machinery, & factories]
Can produce something
directly with these
FINANCIAL CAPITAL
[stocks, bonds, and money]
Can’t produce anything
directly with these

44. Rent Wages Interest Profits Land Labor Capital Entrepreneur.
Entrepreneurship – starting a new business or introducing a
new product.

45. TRADE OFFS You can pick one of five places for a vacation
Hawaii
Italy
Las Vegas
Paris
Japan
Why did you choose the one place over the others?
This is a trade off

46. OPPORTUNITY COST What does opportunity cost mean?
Use the decision making grid below
Sleep Late
Wake up early to study
Benefits
Opportunity Cost
Benefits Forgone

47. PACED Activity P What is the Problem? A What are the Alternatives?
C What are the criteria?
E Evaluate the alternatives.
D Make a decision

48. P- What is the Problem. Who should get 5 extra points on the first
P- What is the Problem? Who should get 5 extra points on the first test?

49. You have 10 minutes (click to start countdown)
A- What are the Alternatives? Come up with 5 ways to make this choice (ex. Rock, Paper, Scissors)
You have 10 minutes
(click to start countdown)

50. 10

51. 9

52. 8

53. 7

54. 6

55. 5

56. 4

57. 3

58. 2

59. 1

60. You have 10 minutes (click to start countdown)
C- What are the criteria? Come up with 5 ways that you can judge your choices (ex. Is it fair)
You have 10 minutes
(click to start countdown)

61. 10

62. 9

63. 8

64. 7

65. 6

66. 5

67. 4

68. 3

69. 2

70. 1

71. You have 5 minutes (click to start countdown)
E- Evaluate the alternatives. If the Alternative is fair give it a plus, if not give it a minus
Fair
Rock, Paper Scissors +
You have 5 minutes
(click to start countdown)

72. 5

73. 4

74. 3

75. 2

76. 1

77. D Make a decision Total across
Fair
Rock, Paper Scissors + _ 2
You have 3 minutes
(Click to start countdown)

78. 3

79. 2

80. 1

81. Which Did Your Group Choose?

82. WATER Demonstration

83. DECISION MAKING AT THE MARGIN
You give yourself more options to calculate how to get a little of both choices with the best overall benefits.
Decision making at the Margin Grid
Options
Benefit
Opportunity Cost
1hour of study time
2hour of study time
3 hour of study time

84. Production Possibilities
A production possibilities graph shows alternative ways that an economy can use its resources.
The production possibilities frontier is the line that shows the maximum possible output for that economy.
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph
a (0,15) 15 8 14
b (8,14) 14 18 20 21 12 9 5
A production
possibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0) 1 2
Chapter 1, Section 3

85. Shoes (millions of pairs) Watermelons (millions of tons)
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.
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14) S
g (5,8)
A point of underutilization 1 2
Chapter 1, Section 3

86. Shoes (millions of pairs) Watermelons (millions of tons)
Growth
Growth If more resources become available, or if technology improves, an economy can increase its level of output and grow. When this happens, the entire production possibilities curve “shifts to the right.”
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph T
Future production
Possibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14) S 1 2
Chapter 1, Section 3

87. Watermelons (millions of tons) Shoes (millions of pairs)
Cost
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph 14 18 21 12 9 8
c (14,12)
d (18,9)
Cost A production possibilities graph shows the cost of producing more of one item. To move from point c to point d on this graph has a cost of 3 million pairs of shoes. 1 2
Chapter 1, Section 3

88. Opportunity Cost of Doing Your Best In School Cheerleaders doing flips
Better Job
Better chance
in college
Better chance at
the best colleges
Always get a
prom date or 2
Beautiful
Spouse
Cheerleaders doing flips
to get your attention
Better chance
to be the boss
And – They
ask you!
Learn
Responsibility
Fewer problems at home
Better
Self-esteem
You always do
your homework
Report Card
A Econ
A English
A Calculus
A Journalism
C Sex Ed

89. [of NOT doing your best in school]
Opportunity Cost
[of NOT doing your best in school]
Worse Job
“Paper or Plastic?”
“Do You want fries
with that?”

90. But You Could Have Had This Job!!

91. Production PossibilitiesA E
More or better resources or better technology B
Capital Goods D C
Consumption Goods
1. At what letter is there unemployment [recession]?
2. What letters represent resources being used in their
most productive manner? [full employment,
full production, and best available technology]
3. What letter represents an improvement in technology,
therefore a new PPC frontier line?
4. At what letter would there be the most economic growth in the
future if a country were producing there now?
What is the opportunity cost when moving from “C” to “A”;
when moving from B to C;
and do we have to give anything up when moving from D to B? D
A, B, or C E A
Consumption
Capital no

92. The End