2TINSTAAFL What do these letters stand for? THERE IS NO SUCH THING AS A FREE LUNCHThe more a business gives away for “FREE” it must make up for by charging higher prices for other items
3Free?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.
4Answer 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…
5Scarcity… 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 WantsSCARCITYLimited resourcesIs scarcity caused by a shortage of money??
6Warm 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.
74 Factors of ProductionResources used in the production of goods and services1. Land2. Labor3. Capital4. Entrepreneurship
8LAND “gift of nature” or natural resources Resources no created by human effortLimited in supply
9CAPTIAL Tools, equipment and factories used in production Financial capital- money used to buy tools and equipment for production
10LABOR 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
11ENTREPRENEURSHIP Entrepreneur: a risk-taker in search of profits Driving force in the American economyTheir initiatives combine other 3 factors; land, labor and capital
12Warm 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 RingLand: DiamondCapital: diamond cutter/polisherLabor: GemologistEntrepreneurship: Diamond distributor
13Three Basic Questions… are used by society to decide how to best use limited resourcesWhat To Produce?How To Produce?For Whom to Produce?
14WHAT TO PRODUCE??Should society produce more consumer goods like clothing and food or military equipment like airplanes and submarines?GUNS v. BUTTERSociety cannot produce enough for all wants so it must decide…
15HOW TO PRODUCE??Most efficient, cost effective way to produce goods/servicesAssembly line v. less equipment more workersWhich is better?
16FOR WHOM TO PRODUCE? How will produced items be allocated? Pricing, location and availability usually determine who while receive these itemsBMW automobile?Low-income housing?Old Navy jeans?
17ECONOMICSthe study of how a society produces, distributes and consumes its limited resources with unlimited wants.WARM UP #14- 9/23/14Write a brief description of the American economic system as YOU see it using the concepts of :SCARCITYFACTORS OF PRODUCTION3 BASIC QUESTIONS.
22Trade-offs Alternative choices when spending your income or time. AlternativesCRITERIA$75 or Less?Durable?Will Parents approve?Can use any time?Several CDsyesnoConcert TixmaybeSoccer BallJeans
23Opportunity CostThe cost of the next best alternative use of money, time or resources when one choice is made rather than another.Example: based on earlier chartChose jeans so not enough money left for next best option – soccer ballOpportunity cost of jeans was soccer ball
24Warm Up #15- 9/24/14Explain trade-off and opportunity cost in your own words and then give an example.
25Create your own … Decision Making Grid Must determine 3 alternatives and total amount of money you can spend along with 2 other criteria…AlternativesCriteria$___ or less??1.2.3.Determine your choice and the opportunity cost of your choice.
26Warm Up #16 – 9/26/14If 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.
27Production 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.
29Trucks 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?
30Opportunity 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.
31Create your own…Production Possibilities Frontier for a textile company that produces jeans and t-shirts.JeansT-Shirts100407560507025120
32Opportunity Cost?What is the opportunity cost of increasing production of 20 more shirts?( Hint: how many less jeans?)
33Explain…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.
34Basic Economic Concepts Chapter one Section three
35Needs v. WantsTake 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 survivalWant: a means of expressing a needEx. Food is a need but pizza is a want.
36Warm Up #17 – 9/29/14Review 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.
37Economic SystemAn organized way of providing for the wants and needs or their peopleThree major types of Economic systems:Traditional EconomyCommand EconomyMarket Economy
38Create the chart in your notebook and use pages 33-37 to fill it in… TraditionalCommandMarketStrengthsWeaknesses3 economic questions
39TraditionalCommandMarketStrengths-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 satisfactionWeaknesses-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
40What? Based on tradition TraditionalCommandMarketStrengths-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 satisfactionWeaknesses-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 failures3 economic questionsWhat? Based on traditionHow? Same as pastFor Whom? Customs and traditions of socieyWhat? Central authority (govt)How? Central authorityFor Whom? Central AuthorityWhat? Individuals (consumers and producers)How? IndividualsFor Whom? Individuals
41Assessment: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…
43Key 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 othersGood:Tangible commodity = book or carDurable good:Last 3 years or more when used on a regular basisWasher and dryerNondurable good:Item that lasts less than 3 years when used on regular basisService:Work that is performed for someoneHaircut, home repairs
44Conspicuous consumption: Value: Paradox of Value: Utility: Consumer:People who use goods and services to satisfy wants and needsConsumption:The process of using up goods and servicesConspicuous consumption:The use of a good or service to impress othersValue:A worth that can be expressed in $Paradox of Value:Diamond-water paradox…come back to thisUtility:Capacity to be useful to someoneTo have value must be scarce and have utilityWealth:Some of economic products that are tangible, scarce, useful and transferable
45Paradox of Value PARADOX- a statement that seems contradictory Some essentials have very little value while others have high value; something to do with scarcityDiamond/water paradox: water is plentiful has little value but diamonds are scarce but have great value
46Production: Productivity: Specialization: Division of labor: Process of creating goods and servicesProductivity:Efficient use of productive resourcesSpecialization:Productive inputs do whatever task they are able to do bestDivision of labor:Takes place when workers perform fewer tasks more frequentlyHuman capital:The sum of skills, abilities, health and motivation of peopleInvesting it workers helps improve production
47Economic interdependence Actions in one part of country or world has economic impact on what happens elsewhereCold snap in Florida may affect orange crops which could affect price of oranges and orange juice may become more expensive
48Circular Flow Model Economic flow of resources and money Components Markets: place of buying and selling goodsFactor Market: factors of productionProduct Market: finished productsIndividuals: consumers who use income to purchase goods and themselves as laborBusinesses: purchase factors of production and produce finished products
50Show 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 PopcornBe prepared to it in for a formative grade…
51Chapter One Review Homework: book pgs. 28 and 29 Complete the following questions in your notebookReviewing Key Terms #1-10Reviewing Facts #s 1-3, 5-7, 8-9, 11-12