Unit One, Lesson One Notes How is Economics defined by scarcity?
◘ Economics comes from the idea that people CANNOT always have what they want and what they need ◘ So, ECONOMICS is the study of how people seek to satisfy their needs and wants by making CHOICES
◘ What is a need? What is a want? ◘ Need: something that is necessary for survival ◘ Want: item that is not needed for survival ◘ Because you can’t get everything you want or need, you must… MAKE CHOICES!! ◘ Why must we make choices? Because resources are scarce!! ◘ What resources are scarce in our everyday lives? ◘ Water, food, oil
Goods Services Goods: physical objects Examples: shoes, shirts, cars, pencils, etc. Services: actions or activities that one person performs for another. Examples: haircuts, tattoos, dental checkups, etc.
Scarce/scarcity: limited resources for unlimited wants (Scarcity always exists). ◘ Scarcity is NOT the same as a shortage. ◘ Shortage is a temporary (sometimes long- term) lack of goods or services. ECONOMICS IS ALL ABOUT SOLVING THE PROBLEM OF SCARCITY!! HOW DO WE FULFILL WANTS/NEEDS WITH FEW RESOURCES? Video Clip
Unit One, Lesson Two Notes What are the 3 Factors of Production and why are they important to consider in our economy?
◘ Economists call all the resources that are used to make all goods and services FACTORS OF PRODUCTION ◘ The factors of production are land, labor, and capital
Also called factor resources. They consist of: Land Labor Capital
All natural resources used to produce goods and services. Examples are: land, water, wood, wind, sun, cotton, etc.
◘The effort that a person devotes to a task for which the person is paid. Examples are: medical assistant, assembly line worker…just about any job you can think!
Physical capital- buildings, tools, etc. Human capital- knowledge and skills a worker gains through education and experience. Both of these are needed to produce goods and services in our economy!!
◘ Suppose a family of 6 wash dishes by hand every day for every meal (breakfast, lunch, dinner) – 21 meals per week. It takes 30 minutes per meal for 2 people to wash the dishes. That’s 21 hours per week spent washing dishes. ◘ Now, let’s say that the family buys a dishwasher for $400. Now it takes 1 person 15 minutes per meal to clean all the dishes. This takes 5 ¼ hours per week.
◘ Goal was to create online social network for students- for free. ◘ Worked with venture capitalists. ◘ One offered $500,000 to work on Facebook full time. ◘ That fall, they had over six million members. ◘ Six months later, Zuckerberg and his partner got $12.7 million more in funding. ◘ Members like, advertisers love. ◘ By 2008 had more than 70 million users. ◘ Growth=more jobs
◘ You will illustrate the factors of production in the making of fast food French fries. (You cannot imagine how much goes into those tasty things!!) ◘ You can choose any GOOD! ◘ You can work alone or in pairs (no more than 2). ◘ You will create a poster with a diagram or a PowerPoint presentation to share with the rest of the class. ◘ Each factor must include a minimum of 3 examples but a total of 15 items. ◘ Land ◘ Labor ◘ Capitol (you can show a combination of human and physical capitol) Feel free to use the Internet to find all of the resources!
◘ Refer to the following websites as a guide: ◘ http://www.rense.com/general7/whyy.htm http://www.rense.com/general7/whyy.htm ◘ http://www.gladwell.com/2001/2001_03_05_ a_fries.htm http://www.gladwell.com/2001/2001_03_05_ a_fries.htm ◘ http://www.potatopro.com/Newsletters/200 81021.htm http://www.potatopro.com/Newsletters/200 81021.htm ◘ http://www.usatoday.com/money/industries /food/2006-06-08-wendys-usat_x.htm http://www.usatoday.com/money/industries /food/2006-06-08-wendys-usat_x.htm Feel free to use the Internet to find all of the resources!
French Fries Land (ex. field, water) Labor (farmers) Capital (tractor ) Feel free to use the Internet to find all of the resources! Your illustration may look something like this: Both physical and human capital
Of Peanut Butter! http://peanut-butter.org/peanut-butter/How+Peanut+Butter+is+Made
◘ Soil to help the plants grow ◘ Peanut Plants to make the peanuts ◘ Farms to harvest peanuts ◘ Water to help the plants grow ◘ Air to help the peanuts dry out
◘ Farmers harvest the peanut plants. ◘ “Shellers” at manufacturing plants remove excess dirt and debris. ◘ Peanut butter manufacturers receive the fresh peanuts and begin the process of turning them into peanut butter. ◘ Other factory workers who grind, process and package peanut butter.
◘ The peanut farmers who plant and harvest the peanuts. ◘ machines which start by pulling the plants from the ground, breaking away the roots, and shaking out excess soil. ◘ When the dried plants are harvested, they are placed in wagons and given additional drying time, ◘ Then, they are inspected by the Federal or State Inspection Bureaus for quantity and valuation purposes. ◘ The blancher machine removes the outer skins by lightly rubbing the peanuts between two belts. ◘ Additives that include salt, sugar, and hydrogenated vegetable oil ◘ The jar to fill the peanut butter up with!
Unit One, Lesson Three Notes If there is not enough for everybody, how do you make a choice?
◘ If land, labor, and capital are the essential ingredients for creating all goods and services, who pulls those resources together? ◘ The answer: entrepreneurs ◘ Entrepreneurs are ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services
◘ Economists say that all goods and services are scare because the land, labor, and capital used to create them are SCARCE ◘ This means that the land, labor, and capital to produce them are SCARCE
◘ Economists say that all people, even government, make decisions that involve TRADE-OFFS ◘ TRADE OFFS are all the alternatives that we give up whenever we choose one course of action over another ◘ EVERY decision that is made involves trade-offs
◘ Decisions that business people make on how to use land, labor, and capital involve trade-offs ◘ Normally one decision is more desirable than all the other decisions ◘ Do you wake up early and study or do poorly on the test and get extra sleep?
◘ Economists simplify their explanations of the trade-offs countries face by using the example of guns or butter ◘ For example, if a country produces more military goods (guns) they will have less resources to devote to consumer goods (butter)
◘ This leads to opportunity cost ◘ Opportunity cost is the most desirable alternative that is GIVEN UP as a result of a decision ◘ Essentially, OPPORTUNITY COST is what you’re willing to SACRIFICE as a result of your decision ◘ Because of SCARCITY one cannot do both decisions – a CHOICE must be made
◘ Thinking at the margin involves adding or subtracting a unit from the decision that involves opportunity cost ◘ This does not allow one to take an all or nothing approach ◘ So, do you wake up 30 minutes early instead of 1 hour to study? ◘ This allows more decisions for one person to choose
◘ This decision making process is sometimes called COST/BENEFIT ANALYSIS ◘ Anytime a decision is made economists realize that one has to compare opportunity costs and benefits (what will be sacrificed and what will be gained) ◘ This is ECONOMICS