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Basic Economics ECONOMICS - “science of scarcity” choices - the study of the choices people make in an effort to unlimited needs and wantslimited Satisfy.

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Presentation on theme: "Basic Economics ECONOMICS - “science of scarcity” choices - the study of the choices people make in an effort to unlimited needs and wantslimited Satisfy."— Presentation transcript:

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2 Basic Economics

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

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5 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?

6 NECESSITIES Food Clothing ShelterLuxuries V. Gump Household

7 Old economics textbooks with a sign that says “free books, take as many as you want.” The books have been three years.

8 One economics textbook and five students who want to study for test.

9 Petroleum in Japan, a country without its own oil fields and without oil reserves.

10 Petroleum in Saudi Arabia, a country with many oil fields and oil reserves.

11 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.

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

13 Good Service Mechanic giving car a tune-up

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16 Good Service Watch

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19 Good Service Watch Repair

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22 Good Service Hamburger

23 Right

24 Wrong!

25 Good Service Basketball

26 Right

27 Wrong!

28 Good Service Bicycle

29 Right

30 Wrong!

31 Good Service Hair Cut

32 Right

33 Wrong!

34 Good Service Garbage Pickup Waste Management

35 Right

36 Wrong!

37 Good Service Laptop Computer

38 Right

39 Wrong!

40 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 “Need” those first three to survive. Unlimited Human Wants Limited Resources Land, L abor, C apital, E ntrepreneur R ent, W ages, I nterest, P rofits

41 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

42 . Land natural resources Nature’s items 1. Land [natural resources] – Nature’s items In the earth A. In the earth - coal, oil, fossil fuels, etc. On the earth B. On the earth – vegetation and water In the atmosphere C. In the atmosphere – sun, wind, and rain The Four Factors of Production “Gifts of Nature” starting point Land is the starting point of all production.” Water Wind Sun Fossil fuels 9

43 . Laborhuman resources“effort” 2. Labor [human resources] {“effort”} “paid work” anyone who works [“paid work”] “brain-power” [Labor is the “brain-power” and “muscle-power” “muscle-power” of human beings] Physical A. Physical – pro athletes & lumberjacks Intellectual B. Intellectual – ministers, doctors & lawyers “Hired Help” 10 *Most important resource – 70% of input cost

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

45 . 4. Entrepreneurship starting a new businessintroducing a 4. Entrepreneurship – starting a new business or introducing a new product new product. Rent Wages Interest Profits Land Labor Capital Entrepreneur

46 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

47 OPPORTUNITY COST What does opportunity cost mean? Use the decision making grid below Sleep LateWake up early to study Benefits Opportunity Cost Benefits Forgone

48 P WHAT IS THE PROBLEM? A WHAT ARE THE ALTERNATIVES? C WHAT ARE THE CRITERIA? E EVALUATE THE ALTERNATIVES. D MAKE A DECISION PACED Activity

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

50 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)

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61 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)

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72 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 +

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78 2 YOU HAVE 3 MINUTES (CLICK TO START COUNTDOWN) D Make a decision Total across Fair Rock, Paper Scissors +++_

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82 Which Did Your Group Choose?

83 WATER DEMONSTRATION

84 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 OptionsBenefitOpportunity Cost 1hour of study time 2hour of study time 3 hour of study time

85 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. Chapter 1, Section 3 Watermelons (millions of tons) Shoes (millions of pairs) Production Possibilities Graph Watermelons (millions of tons) 0 a (0,15) b (8,14) A production possibilities frontier c (14,12) d (18,9) e (20,5) f (21,0)

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

87 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.” Chapter 1, Section 3 Shoes (millions of pairs) 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

88 Cost 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. Chapter 1, Section 3 Watermelons (millions of tons) Shoes (millions of pairs) Production Possibilities Graph Watermelons (millions of tons) c (14,12) d (18,9)

89 Always get a p rom d ate or 2 Better Job Better chance in college You always do your homework BeautifulSpouse Better chance at the best colleges Cheerleaders doing flips to get your attention And – They ask you! Better chance to be the boss Fewer problems at home LearnResponsibility BetterSelf-esteem Opportunity Cost of Doing Your Best In School R eport C ard A Econ A English A Calculus A Journalism C Sex Ed

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

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

93 The End


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