Presentation on theme: "UNIT 2: The Choice is Yours!"— Presentation transcript:
1UNIT 2: The Choice is Yours! Basic economic concepts, choices, rational decision making, investment in education/training, etc
2Unit 2 standardsSSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.b. Define and give examples of productive resources (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).c. List a variety of strategies for allocating scarce resources.d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.SSEF2 The student will give examples of how rational decision-making entails comparing the marginal benefits and the marginal costs of an action.a. Illustrate, by means of a production possibilities curve, the tradeoffs between two options.b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
3Unit 2 standards (continued) SSEF6 The student will explain how productivity, economic growth, and future standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people.a. Define productivity as the relationship of inputs to outputs.b. Give illustrations of investment in equipment and technology and explain their relationship to economic growth.c. Give examples of how investment in education can lead to a higher standard of living.SSEPF1 The student will apply rational decision making to personal spending and saving choices.a. Explain that people respond to positive and negative incentives in predictable ways.b. Use a rational decision making model to select one option over another.c. Create a savings or financial investment plan for a future goal.
5GPSSSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.Define and give examples of productive resources (e.g., land (natural), labor (human), capital (capital goods), entrepreneurship).5
6Factors of ProductionWhat went into making this?6
7What went into this? Rubber (from Malaysia) machines metal Someone who put all of this together.woodgraphite7
84 Categories of Productive Resources (Factors of Production) LAND LABORCAPITAL ENTREPRENUERSHIPNatural, renewable resourceswood, rubber, graphite, land, animalsHuman resources, peopleMENTAL and PHYSICALA produced good used in the production of another goodMachines, computers, buildings, etcThe person or group responsible for putting the other 3 together to produce something8
10Opportunity CostsOPPORTUNITY COSTS: the value of the NEXT BEST alternative given up when a choice is madeNEXT BEST is key, the cost is not everything you give upOpportunity cost is not always money
11Opportunity Costs Examples Mr. Cannon really wants BOTH goods:$3,500$1,000
12Opportunity Costs Examples He decides to spend his money on:$3,500What was the price he paid?What was his opportunity cost?
13Opportunity Costs DVD set of a TV Show($60) New outfit ($85) You have $100 to spend at the mall, rank the following in the order (1, 2, 3) you would purchase them.DVD set of a TV Show($60)New outfit ($85)New pair of shoes ($65)
15GPSSSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.Illustrate by means of a production possibilities curve the trade offs between two options.
16PPC a graph that shows the trade-off between two production options A visual representation of OPPORTUNITY COSTS2 Assumptions:The company/country is ONLY producing the two goods on the graphThe company/country desires to use ALL of their resources
17PPC – an example 500 300 Suppose a country makes Pencils and Pens. If they devoted ALL of their resources to pencils, they could make 500 a day…..to pens, they could make 300 a day500300
18PPC – an exampleThe country/business can produce anywhere on the line when they use ALL of their resources500PencilsPens300
19PPC – an exampleIf the country is producing ONLY pencils, and they want pens, they have to give up pencils.500450PencilsThe more pens they want…..200Pens125200300
20PPC – an exampleYAt point X, the country or business is producing below its possibilities and is INEFFICIENT500PencilsXAt point Y, the country or business is producing beyond its possibilities and is NON-SUSTAINABLE.200Pens75300
21Journal #5: Graph this country’s PPC After graphing, answer these questions:Assume the country is currently producing 180 of good A and 25 of Good B. If the country wants to make 75 of Good B, how many of good A must they give up?If the country was producing 150 of Good A and 30 of Good B, what could you conclude about the country’s economy?GOOD AGOOD B200180251505010075110
23GPSDefine productivity as the relationship of inputs to outputs.
24ProductivityWe measure productivity as the relationship of inputs to outputsFor a business it’s the cost of all their resources compared to their revenueFor a country it’s the cost of all of their resources as compared to their GROSS DOMESTIC PRODUCT (GDP)
25Improving Productivity Increased CapitalMore factories, tools, machines, etcImprove technologyFaster machines, multi-tasking devices, machines with larger capacityTrain/educate workersSpecialization, new techniques, ability to USE technologyImprove entrepreneurshipBetter organization of resources, motivational tools, leadership, worker morale25
26Headlines HEADLINE 1: WHIRLPOOL FACTORY INCREASES PRODUCTIVITY What are some steps the Whirlpool Factory could have taken to increase productivity?How could this increase in productivity benefit the workers?HEADLINE 2: U.S. PRODUCTIVITY RISES RAPIDLY FOR 6TH CONSECUTIVE QUARTERHow can rising productivity benefit workers? Producers? The nation?Could there be some disadvantages of increasing productivity, at least to some people?HEADLINE 3: PRODUCTIVITY LAGS FIRST THREE QUARTERS OF 93Why is lagging productivity a problem for the nation, businesses, and individual workers and consumers?
28GPSGive illustrations of investment in equipment and technology and explain their relationship to economic growth.Give examples of how investment in education can lead to a higher standard of living.
29Economic GrowthFor countries, we look at economic growth in terms of GROSS DOMESTIC PRODUCT (GDP) and GDP PER CAPITAGDP = dollar amount of all goods and services produced in an economyGDP Per Capita = GDP divided by the populationWhat makes an economy grow?
30Factors Affecting Economic Growth High Investment in physical and human capitalGreater economic freedomlower taxes, fewer regulations, protecting property rightsStrong Incentives to SaveCompetitive MarketsPolitical StabilityFree Trade
31Historic examples Cotton Gin in America Before Cotton Gin: 1 man = 1 pound of clean cottonAfter Cotton Gin: 1 man = 50 pounds of clean cotton
32Historic examples Assembly Line Before AL: .08 car frame in an hour (1913)After AL: .67 car frame in an hour (1914)
33Wheat Harvesting (Bushels in 1 hour) Historic ExamplesWheat Harvesting (Bushels in 1 hour)
34Literacy Rates Country Literacy Rate Bahamas 95.6% Australia 99% Bolivia86%USSudan61%GDP per capita$25,000$36,300$4,000$48,500$2,200
35Rank these countries Country C: Nigeria Country A: Argentina Population: 126,635,626PerCapita GDP: $950Literacy Rate: 57.1%Country A: ArgentinaPopulation: 37,384,816PerCapita GDP: $12,900Literacy Rate: 96.2%Country D: RussiaPopulation: 145,470,196PerCapita GDP: $7,700Literacy Rate: 98%Country B: JapanPopulation: 126,771,662PerCapita GDP: $24,900Literacy Rate: 99%Country E: SingaporePopulation: 4,300,419PerCapita GDP: $26,500Literacy Rate: 93.5%
37Economic Growth Not 1 magical thing, combination of several factors Capital GoodsConsumer GoodsNot 1 magical thing, combination of several factorsIncreasing overall productivity is key
38Factors Affecting Economic Growth High Investment in physical and human capitalGreater economic freedomlower taxes, fewer regulations, protecting property rightsStrong Incentives to SaveCompetitive MarketsPolitical StabilityFree Trade
39Different PPC graphs can show how different variables affect an economy.
40Different PPC graphs can show how different variables affect an economy (continued). A natural disaster such as a hurricane has the effect of Case 1 on a local economy. Here, both capital (buildings and equipment) and labor are lost due to the calamity. Since the region’s production inputs are reduced, so too is its PPC, moving from A1 to A2. The region may recover over time, but the immediate effect of the disaster is to move the entire PPC inward.Conversely, consider a local area with a booming economy; people are moving there in droves (providing labor), and businesses are investing in the area to take advantage of the increased number of consumers and potential employees. This would lead to a condition illustrated in Case 2, where the entire PPC shifts outward.
41Different PPC graphs can show how different variables affect an economy (continued). Now imagine a small town has just received a large economic development grant from the federal government. The amount of capital available to this economy has greatly increased while its labor pool remains unchanged, so a movement like that shown in Case 3 occurs. The new PPC, C2, shows how the investment will create an enhanced ability to produce capital goods. Lastly, increases in labor inputs (such as a higher number of college graduates) will lead to Case 4. Here, the boost to the labor force allows the PPC to shift from D1 to D2.
43Rational Decision Making Analyzing costs and benefits before making a decisionMARGINAL thinking is keyWhat is the cost/benefit of my NEXT decisionPast decisions don’t matterthis affects PRODUCERS AND CONSUMERSA rational decision is made when the marginal benefit is equal to or greater than the marginal cost
44Costs and Benefits For producers, this is simply measured in dollars Marginal costs of the inputs vs. marginal revenueFor consumers, it is trickierWe measure benefits in terms of UTILITYHow “useful” is the item or serviceWe use “utils” as the measure for this
45Another Example You purchased a ticket to see 10 minutes into the movie, you realize it is going to be horrible.DO YOU STAY OR LEAVE?Write down your answer and reason WHY.
46RDM Example (cont’d) COST BENEFIT STAY Lost opportunity to do next best thingSee end of movieCan discuss movie with othersLEAVECan’t discuss with othersWon’t see endingCan do next best thing which may bring more satisfaction
47Another exampleA person opens a business making sandwiches. He’s purchased a store and all of the food products, now he wants to hire some people. He decides to hire two people to start with and pay them $50 a day. His costs/benefits sheet for a month looks like this:
49Should he hire worker #3? Why? 1 MonthRent, Food, Entrepreneurship - $750Worker #CostProductionPrice/Sand1$7502505232004100Should he hire worker #3? Why?What about #4? Why?
50What will be on the test? Factors of production Scarcity Define themPick them from an exampleProductivity/GrowthWhat causes itHow do we measure itRational Decision Making/Marginal AnalysisWhat is marginalWhen do stop/start doing somethingScarcitydefinitionexamplesOpportunity costProduction Possibilities CurveWhat do they show?interpret points (below, above, moving from one point to another)DRAW ONE!!!!
52Georgia Performance Standard SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity by making choices.52
53ScarcitySCARCITY: a condition that exists when UNLIMITED needs/wants exceed the LIMITED available resourcesThe central problem in economics, all things revolve around scarcityMust be a want/need for the item and a limited amountThere are DEGREES of scarcityIf there is a lot of something that no one wants, it is less scarce than something MANY people want53
54MORE SCARCE - Small quantity, many uses, high demand LESS SCARCE Large quantity, few uses, low demand54
55Scarcity SituationsOld books that, for 2 years, have sat on a shelf that reads “Free! Take One.”Oil in Saudi ArabiaOne book, 5 students needing to study the book for a quizDiamondsOil in EnglandA $10 bill to a millionaireAn MVP basketball playerA copy of Mr. Cannon’s testsVHS Tapes to a 10 year oldKnowledge of Economics55
56MORE SCARCE - Small quantity, many uses, high demand LESS SCARCE Large quantity, few uses, low demandOld books that, for 2 years, have sat on a shelf that reads “Free! Take One.”Oil in Saudi ArabiaOne book, 5 students needing to study the book for a quizDiamondsOil in EnglandA $10 bill to a millionaireAn MVP basketball playerA copy of Mr. Makaya’s testsVHS Tapes to a 10 year oldKnowledge of Economics56
57Sample Questions for Unit 2 1 Opportunity cost is BEST described as theA most expensive resource used in productionB sum of all production costsC value of the next best alternative forgone when a choice is madeD monetary value of all alternatives forgone when a choice is made
58Answer to 1 1. Answer: C Standard: Scarcity and opportunity cost Opportunity cost is the value of the next best economic choice you did NOT make. Choice D is the sum of all possible opportunity costs, but opportunity costs are not added up. Only the best alternative forgone, choice C, counts as the opportunity cost.
60What BEST explains the shift of the production possibilities curve from B1 to B2? A improvements in agricultural technologyB inflationary increases in processC higher costs of producing cornD higher costs of producing wheat
61Answer to 2 2. Answer: A Standard: Investment and economic growth An outward expansion of a production possibilities frontier means greater productivity. One way greater productivity can be achieved is by improving technology.
62Question 33 Alex and Dylan mow and trim lawns. Currently, each man mows and trims a lawn by himself, but the process takes a long time. They would MOST likely improve their efficiency ifA Alex and Dylan mow a lawn and then trim it togetherB Alex mows a lawn while Dylan trims the same lawnC Alex trims Dylan’s lawn while Dylan trims Alex’s lawnD Alex and Dylan reduce the number of lawns they mow and trim
63Answer 3 3. Answer: B Standard: Benefits of specialization One of the best ways to improve efficiency is to specialize, which means each person in a production process concentrates on a specific task. Choice A would still require each man to mow and trim, while choice C simply changes the lawn each man is trimming. Choice D, on the other hand, reduces the total number of lawns they mow but does not improve the efficiency with which they complete their task. Only choice B would be a specialization of labor. In this case, Dylan now does one task in the production process (trims) while Alex does another task (mows). According to economic theory, this specialization will make each man better at his respective task and reduce the time it takes to change from one task to another, thereby increasing their overall efficiency.