Foundations of Government and Economics

Foundations of Government and Economics
Why do we take AGES? What do both have in common? Video: The Tarnished Dreams Government and economics deal with people and their decision making To start the course…

On your blank piece of paper…
Divide your paper into four sections (fold!) Use the prompt on the board to define/identify/draw given what you know now. Do not write on the back because we will use both sides!

Define it in your own words.
Government Define it in your own words. List similar words/concepts from current news. Use it meaningfully in a sentence. Draw a picture of it.

Warm-Up # 1 - 9/4/14 In your journal, please write down a definition of the term GOVERNMENT in your own words.

Introductory thoughts ….
the-impact-congress

Relationship between economics & government?
Make a List! 2 How about to your life? Relationship between economics & government?

Caricatures What are they?
a drawing that makes someone look funny or foolish because some part of the person's appearance is exaggerated

CARICATURES Use of symbols or other items that represent an idea associated with the person or topic

America as a caricature?
How would you draw America as a caricature? Man or woman? Young or old? Fit or fat? Attractive or ugly? What symbols would come associated with it? A truck? A tank? A hybrid? On your paper, draw America as you envision it as a caricature. Must have color and at least two symbols/items/accessories. No stick figures! 

YOUR CARICATURE MUST: - Have color - Be of America and how you view our country - Include symbols/items/accessories that represent how you view our country - Have a reasonable explanation for how it looks PLANNING: How do I view America? Positively? Negatively? How can I represent this? What colors can I use to show my view? What are some major issues in America today? How can I represent these in my caricature?

Warm Up -#2a- 9/5/14 The New York Times and CBS News Poll…
How much of the time do you think you can trust the government in Washington to do what is right: just about always, most of the time, or only some of the time?” 5% (1 person in 20) responded “just about always” 4% responded “most of the time” 87% responded “only some of the time” 4% responded never

Warm up # 2b– In Journal- How can you link this poll to why it is important to study our government and economic system?

Economist and Politician Assumptions
When studying humans, people in politics and economics think about… Self worth: individuals have worth and value their lives Self interest: people pursue their own interests to improve their lives Competition/Cooperation: When seeking self- interest in a community or society, people tend to do cooperate or compete depending on desired outcome Equilibrium: Balance of competing forces

Individualism What words do you associate with individualism?
Our definition: ideology, or social outlook that emphasizes the moral worth of the individual

Quote activity Teacher will count you off by 6
The first 5 minutes, you will on your own sort your quotes by what you agree with and what you do not  this is a quiet activity Write “A”, “D” , or “I” next to each quote on your sheet You may then have 10 minutes to share your opinions and ideas, then create a “master list” of agrees vs. disagrees

Quote breakdown: Individualism: Collectivism: Individual and Society
“Remember always that you not only have the right to be an individual you have an obligation to be one” “You have your way. I have my way. As for the right way, the correct way, and the only way, it does not exist” Collectivism: “We must stop thinking of the individual and start thinking of what is best for society” “An individual has not started living until he can rise above the narrow confines of his individualistic concerns to the broader concerns of all humanity.” Individual and Society “Freedom morality, and the human dignity of the individual consists precisely in this; that he does good not because he is forced to do so, but because he freely conceives it, wants it, and loves it. “All that is valuable in human society depends upon the opportunity for development accorded the individual” “We are of course a nation of differences. Those differences don’t make us weak. They’re a source of our strength.”

Warm Up # 3- Current Event 9/8/14
Take a minute to write about a current event you have recently learned about within the past week.

Purpose of Government We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America. According to the Preamble, what are the 6 purposes of our government?

Purpose of Government form a more perfect Union
establish Justice  the law must be reasonable, fair, and impartial insure domestic Tranquility  order is essential to the well-being of society provide for the common defense promote the general Welfare secure the Blessings of Liberty  guarantee civil rights and liberties

3 Theorists Three classical theorists believed in the need for government for different reasons Each reason accepted the assumption that men are invested in their own self-interest Hobbes, Locke, Rousseau

Activity Walk around the room to the quotes and ideas.
Decide which idea is a belief about a form of government Decide which idea is a belief about the natural state of man Based on these ideas, decide which quote belongs to which theorist Explain the quote in your own words and how it relates to each person’s beliefs about government and the natural state of man

Origins of American Government: A customized government
English Enlightenment Thinkers’ Contributions Thomas Hobbes Developed notion of social contract between rulers and their subjects Believed people were too selfish to govern themselves “All mankind [has] a perpetual and restless desire of power…that ceaseth only in death.”

English Enlightenment Thinkers’ Contributions John Locke Ideas helped lay foundations for democratic government Believed people formed governments to protect their rights and were innately good “The end [purpose] of law is not to abolish or restrain, but to preserve and enlarge freedom.”

French Enlightenment Thinkers’ Contributions Jean-Jacques Rousseau Believed people were naturally good but corrupted and enslaved by society Believed government had a duty to secure freedom for their people and if they did not, they had no right to exist “Force does not create right, obedience is due to only legitimate powers.”

With which theory do you agree more? Why?
John Locke Thomas Hobbes

The “Original Dilemma”
All three theorists wrote about the need and purpose of government Government needs to attain power from the people in order to perform any functions CLOSURE: How much power is too much? How much liberty should be given up? …. This represented a debated trade off… Clash of order and freedom= Original Dilemma

Warm Up #5 Hobbes and Locke
Draw a venn diagram like the one below and write in the similarities and differences of the two men as discussed. Hobbes Locke

Groups Block 2 Group 1 Joe B. Keeley Owen Michael Cathers Jeff
Michelle Casey Group 2 Sheredan Cassidy Kim Allie Mike Driver Melissa Austin Group 3 Jason Shayne Mikala Dani Amanda Michael S. Nicoleta Group 4 Mike King Chris Conte Karly Ryan Katie DJ

Groups Block 4 Group 1 Alex B. Nina Jason Corey Trystan Brian Nick S. Group 2 Jake Shawn Katie Drew Wyatt Kat Ashlyn Group 3 Jenna Ceaton Jeff Liv Steve Garcia Tom Group 4 Suzette Julianne Alek Dan Scott Spenser Nick R.

Balloon Game Objective To be the team with the most
filled balloons taped into the square on the board. Rules No running No touching classmates … that does not mean you can’t touch their balloons … No removal of balloons once they are taped to the board You will have less than 5 minutes to come up with a strategy in your group Process: Have 4 bags of balloons (about 7-9 balloons/bag, depending on class size) – each bag should be a different color Place a big “square” on the whiteboard Have large amounts of tape available near the square Read the directions – no running and no touching classmates. Once a balloon is taped to the board, it cannot be ripped down. Let the students begin … The goal is for students to realize that there is no rule saying they can “pop” balloons – they cannot remove balloons from the board but they can pop them. They are also allowed to “pop” balloons in each others’ hands as long as they don’t physically touch each other. If the students’ are being gentle and no one realizes they can pop balloons – quietly suggest it to one student … Observe student behavior – the group that begins popping balloons will most likely hold-off taping their balloons until the end… Let this continue for about 5 minutes and then debrief.

You will have 10 minutes to get as many filled balloons on the square as possible.
This bar timer, will start when anywhere on the slide is clicked. The bar will move from left to right and the word ‘End’ will appear at the end, accompanied by a ‘Deep Gong’ sound. It is possible to change the duration of this timer to any time, by entering the animation settings, and changing the timing for ‘rectangle 3’. Note the time has to be entered as a number of seconds – so if you want 2mins & 30secs – this is entered as 150 (60X = 150). End

Balloon Game Debriefing
What type of behavior did you see during the game? List some adjectives you would use to describe you and your classmates’ actions while playing the game. Why do you think you needed more “rules” during this game? How does this relate to this class? How does it relate to the theorists?

Political Theories Force Theory: small group forced all to submit to person and/or group’s rule Evolutionary Theory: developed naturally out of the evolution of the family Divine Right: held that God created the state and God had given those of royal birth “divine right” to rule Social Contract: argues that state arose out of a voluntary act of free people. State exists only to serve the will of the people

Social Contract Jean-Jacques Rousseau and Locke
Means that people voluntarily give up power to a government to protect them and serve their interests Free to remove that power at any time Government can only create laws when it has the consent of the governed Examples?

Natural Rights Natural rights are “inalienable” and cannot be taken away by any one (government) Government exists to secure our natural rights and is based on the consent of those who are governed Idea of consent derived from social contract theory

Democracy A system of government in which, in theory, the people rule, either directly or indirectly Opposite of democracy is dictatorship, where leader has absolute power and authority Examples?

Concepts of Government
Ordered government—need for order Limited government—basic principle of government which states that government is restricted in what it may do, and each individual has rights that government cannot take away Representative government—idea that government should serve the will of the people (democracy)

Warm up #6 – 9/11/14 Do you feel the Patriot Act ( law that allows government to “invade” your privacy if reason to believe you are involved in questionable behavior) is a violation of your natural rights or a necessary restriction of your natural rights? Why?

Warm Up #7 Are there any rights that you think the government should be able to take away from you? Under what conditions should they be allowed to do this?

And after the Constitution?
Federalism vs. Anti-Federalism Federalists believed: Favored ratification, believed Constitution was strong enough handle nation’s problems, supported a federal government , led by Alexander Hamilton and James Madison Anti-Federalists believed: Opposed ratification, believed Constitution was too strong, wanted a Bill of Rights added to protect individual freedoms from government abuse, led by Patrick Henry and Samuel Adams

Activity Each of you will get a card it either has a term/person or a definition on it. You must find the person who matches you and secretly begin a visual representation of your idea/person/term DO NOT SHARE ANSWERS!!!! We will play a game after…so work in secret with your partner!!!

Picture Activity Gallery Walk !

Constitutional Convention
Met in Philadelphia in 1787 Composed of some of the greatest thinkers, educators, statesmen, and politicians of the day These men were collectively known as “The Framers”

Purpose of the Convention
Initial Purpose was to revise the Articles of Confederation . Delegates quickly realized they were meeting to create a new government (with 3 branches!)

VA Plan v. NJ Plan Virginia Plan New Jersey Plan
Several plans were proposed to correct the weaknesses of the Articles: Virginia Plan New Jersey Plan Major similarities between the 2 plans: Three branches of government Congress retains powers granted under AOC Executive chosen by Congress

Virginia Plan “Large State Plan”
Strong central gov’t L: Bicameral Congress Representation based on population E: “President” Chosen by Congress J: 1+ supreme courts with lower courts

New Jersey Plan “Small State Plan”
Strong state government L: Unicameral Congress Each state would have = representation Expand power to tax & regulate trade E: Two-person presidency Chosen by Congress; able to be removed J: Single Supreme Court Chosen by Executive

Your Task: Create a billboard advertisement detailing the features of one of the plans – NJ or VA - the choice is yours! Goal: “sell” your plan to the people – persuade them to choose your plan!!! Use catchy phrases/slogans and be sure to include the historical features of your plan (VA or NJ). At the end of this project, we will vote on the most persuasive and appealing billboard – this group will receive extra credit on the Unit Assessment!!!

Closure What do you think (or know) happens to these two plans?

States agree Constitution takes effect in 1788
States agree to (ratify) the Constitution only after it was agreed that a Bill of Rights be added Constitution takes effect in 1788 Bill of Rights added in 1791 The Constitution is written in language that is deliberately vague as a result of compromise and to allow for flexibility Why?

Quote The United States Constitution has proved itself the most marvelously elastic compilation of rules of government ever written. – FDR What words stick to you in this quote? Why?

Structure of Constitution
Provides basic framework for U.S. government Outlines basic principles, structure, and processes Three parts— Preamble Articles Amendments

Preamble Introduction to the Constitution Lists ideas that the government should stand for and states purposes We the people of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Prosperity, do ordain and establish this Constitution for the United States of America.”

For each phrase, consider the following…
6 Purpose of Government For each phrase, consider the following… Why do you think the Framer’s put this phrase in the U.S. Constitution? Is this phrase important today? Form a More Perfect Union Establish Justice Insure Domestic Tranquility Provide for the Common Defense Promote the General Welfare Secure the Blessings of Liberty Vocabulary • union—a group of people or States • domestic—related to the home • tranquility—peace • defense—protection • promote—to improve • welfare—general well-being • secure—to keep safe

Articles Main body of the Constitution Lay out basic structure of the national government Further broken down into sections and clauses Article I: Legislative branch Article II: Executive branch Article III: Judicial branch Articles IV: Relations among the states Article V: Amendment process Article VI: Payment of debts; Supremacy Clause; oaths of office Article VII: Ratification

Amendments Formal changes made to the Constitution Twenty-seven in total First ten referred to as the Bill of Rights 26th amendment – 1971 27th amendment – 1992 None since…

Principles of Constitution
The language and structure of the Constitution reflects the basic principles of the U.S. government system Principles— Popular sovereignty Representative government Separation of powers Checks and balances Limited government Federalism Activity 

Activity STEP 1: Fill in the graphic organizer in your guided notes packet. You have 8 minutes on your own to do this STEP 2: On your own or with a partner, create a tri-fold containing visual representations of three different principles of our government. On the back, explain each principle in 2 sentences

Popular Sovereignty Limited Government Separation of Powers
Principle Explanation Popular Sovereignty Idea that people are the source of all power held by the government Limited Government Government possesses only the powers the people give it—it must obey the Constitution Separation of Powers Establishes three separate branches, that share the government’s power. These branches are the executive, the legislative and the judicial Checks and Balances Ensures that none of the three branches can become too powerful. Each branch has ways to limit the power of the other two (ex. President veto power) Judicial Review Power of the courts to decide what the Constitution means. The courts also have the power to declare a government action to be against the Constitution (unconstitutional). Federalism Divides the power between the central government and the States

Check for Understanding Six Principles
Number your paper from 1 - 8

Popular Sovereignty Question 1
“We the people of the United States…do ordain and establish this Constitution for the United States of America.” P.S. Popular Sovereignty

Limited Government Question 2
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, or the right of the people to peacefully assemble, and to petition the Government for a redress of grievances.” LG Limited Government

Limited Government Question 3
During the Watergate Scandal prosecutors accused many of President Nixon’s closest advisors of breaking the law, thus proving the rule of law—NO ONE is above the law. LG Limited Government

Separation of powers Question 4
“The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few or many…may justly be pronounced the very definition of tyranny.” Sep Separation of powers

Checks and Balances Question 5
President Bush nominates Miss Dicks to be director of the C.I.A. but the Senate refuses to confirm the appointment. Checks and Balances cb

Checks and Balances Question 6
Congress in 2005 passes the Stem Cell Research Bill but President Bush vetos the bill. Checks and Balances CB

Judicial Review Question 7
The Supreme Court, in 1954, determined that “separate but equal” was not constitutional and overturned the Plessy vs. Ferguson ruling. Judicial Review JR

Question 8 VA has a law that requires all candidates for a professional cosmetician’s license complete classroom hours, an unpaid internship, and pass a qualifying test. Federalism Fed

Groups Popular Sovereignty Separation of Powers Federalism
Judicial Review Limited Government Checks and Balances

Separation of Powers Executive branch—enforces the laws
Legislative branch—makes the laws Executive branch—enforces the laws Judicial branch—interprets the law

Video rnmentandlaw/branchesofgovernment/

Checks and Balances

Checks and balances In what was do the branches check on one another?
overnment/checks_and_balances.htm

Basic Principles The tenets of democracy are built upon five principles— Worth of the individual Equality of all persons Majority rule, minority rights Necessity of compromise Individual freedom

Self- Worth A recognition of the fundamental worth of every person The democratic process reflects the collective set of individuals who make up society

Equality Democratic concept insists that all entitled to:
equality of opportunity equality before the law Equality of opportunity suggests that no person should be held back for any arbitrary reason, and must be free to develop him- or herself as fully as he/she can (or cares to) Equality before the law suggests that each person should be treated as the equal of all other persons before the law

Compromise Why is compromise important?
A matter of compromise to determine the position most acceptable to the largest number of people Because each individual is important and considered the equal of all others, it stands to reason that people can only make public decisions by way of compromise

Individual Freedom Right of the individual to be free as far as the freedom of all will allow Democracy does not and cannot insist on the absolute freedom of the individual person

Write your own… Now that you know what the foundations of government are… Create your own Constitution! (Or social contract) What do you think is important to include? What do you think could be taken out? Start with “We the people…” and create the ideal contract  Preamble (brief introduction)  Articles (what should it include based on what we learned so far? Include and agree on 10 points)  Amendments (what do you think it should take to change it?)

For your quiz tomorrow…
What questions would you expect to see? Write 5 and the answers on the back of the paper

TED Talk agpZo

Closure Explain two principles of the constitution and how are they connected?

What is Economics? Is the study of how people choose to use their limited resources to satisfy their unlimited wants and needs Important Parts of Economics– CHOICES SCARCITY Choices – how people buy, sell, produce, and consume

Dependent upon assumptions Dependent upon simplification of reality
Economics is… Dependent upon assumptions Dependent upon simplification of reality

Back to our assumptions…
Human Beings are rational All societies suffer from scarcity All buyers seek to maximize utility All sellers seek to maximize profits

Scarcity refers to the limited number of resources (factors of production) that can be used to satisfy the unlimited human wants and needs

For the video… Write down 3 things you did not know
Write down 3 things you did know

http://www.youtube.com/watch?v=TO7UTNS7r 0w

Post Video… Define the main idea of the video in 4-5 words

Advertisement! Knowing some of the basics about what economics is and why we study it… Create an advertisement for an economics course: BE SURE TO INCLUDE: 3 images that represent different economic ideas 2 “thought bubbles” that represent things you’ll learn about in economics 1 slogan that represents why economics is an important course to take

Political Cartoon Analysis

Factors of Production LAND LABOR CAPITAL ENTREPRENEUR
Also called Natural Resources Consider them “gifts of nature” such as air, soil, minerals, water, and plants LABOR Also called Human Resources Includes physical and mental activities that go into producing goods/services CAPITAL Includes tools, machines, buildings, and technologies ENTREPRENEUR Risk taker who is responsible for combining land, labor, and capital to produce goods and services Essentially economics studies how society uses limited resources – HERE ARE THESE RESOURCES Every society is endowed with resources which are used to produce the goods and services that enable it to survive and prosper Production Equation: land + labor + capital = goods & services (inputs = outputs) combined by entrepreneurs REMEMBER THESE RESOURCES ARE LIMITED! “gifts of nature” such as air, soil, minerals, water, forests, plants, animals birds, fish Land resources are NOT created by human effort! 2. Labor – planting crops and building houses or programming videogames 3. Not financial capital (money) it’s physical capital/capital goods (if you buy a car to drive to school or social events then it is a consumer good, but if used to deliver pizzas then it is a capital good economists also include entrepreneurship as a factor of production. Like labor, entrepreneurship is a human input factor but it refers to more than just work; it refers to the creativity and initiative needed to start a business, develop new goods and services, or improve on development or distribution

TASK! Task! Why are entrepreneurs the driving force in our economy?
Answer in 2-3 sentences

Entrepreneurship is profit.
The price of… Land is rent. Capital is interest. Labor is wages. Entrepreneurship is profit.

Economic efficiency is achieved when all available resources are being used. All societies must answer three basic questions to satisfy the needs and wants of their populations.

Should it be military or civilian goods? Food or clothing?
1. What to produce? Should it be military or civilian goods? Food or clothing? Medicine or movies?

Automated or manual labor? Expensive or cheap materials?
2. How to produce it? Automated or manual labor? Expensive or cheap materials? Domestic or overseas labor?

The wealthy or the needy? The sick or the healthy?
3. For whom to produce it? The wealthy or the needy? The sick or the healthy?

Application Activity In groups of 2-3 create your own country (name it please!) With your country’s name, explain the Population, geography, and general population information (i.e…. Choose 5 items for your country to produce and answer the three societal questions for each ALSO: explain why this material would help your economy thrive/reach economic efficiency Create an advertisement for your country with… Images representing what you produce and a slogan for why your country is awesome

EQs How does scarcity impact decision making?

Objectives & Essential Questions
I will be able to create and reflect on a budget given new economics content I will be able to understand scarcity and our mixed economy Essential Questions How does scarcity impact decision making? How do we satisfy our economic wants?

Group Activity Budget Activity
Teacher will break you into groups. In your groups you will be creating a budget for a single family Your group has been given an income for a year. Given your family situation, negotiate with your “family” to complete a budget for 1 month (keep in mind your $$ is in a given year)

http://www.youtube.com/watch?v=yoVc_S_gd _0

How do we satisfy our economic wants?
We buy goods or services! Good – a physical object (tangible) that has been produced for sale Durable – last 3+ years Nondurable – last up to 3 years Service – work done by someone else for which someone is willing to pay Economic products include goods and services since both are produced

How do we make goods & services?
Use Factors of Production - The productive resources that go into producing goods and services Production Equation LAND + LABOR + CAPITAL = GOOD/SERVICE inputs output

Economic Interdependence
What does ‘interdependence’ mean? Is our world becoming economic interdependent or independent? Economic Interdependence: the actions of one part of the country (world) has an impact on what happens elsewhere

How do we make a choice? What do we give up?
Wants & Needs > Resources Because of scarcity, we have to make choices! How do we make a choice? What do we give up? What does this remind you of from our government unit?

Making Choices to Deal With Scarcity
People seek to maximize their utility when making decisions. This requires them to consider tradeoffs. Utility – the satisfaction or benefit a person receives from consuming a good or service Tradeoffs – the alternate choices people have when making a decision also the benefits/advantages of making on decision over another Everyone cannot have everything they want! Therefore, who decides who gets what? Our choices, based upon utility help to decide!

Examples… Some choices are easy to make…
Hmm… Should I have pizza or a hoagie for lunch today? Other decisions are agonizing… Should I get out of bed and go to school today or should I sleep in?

Task! Reflecting on Personal Trade-offs…
Think of ONE decision that you had to make in the last week…Identify your various tradeoffs for that decision Be prepared to share! How did you choose – COST/BENEFIT ANALYSIS (winning choice is one with the most benefit) In the end, what helped you decide amongst your choices?

Opportunity Cost – The best thing we give up to get what we want
When comparing the top 2 choices, it is the BENEFIT of the next best alternative that must be sacrificed to satisfy a want. You do a cost-benefit analysis to figure out which decision is most beneficial There may be numerous tradeoffs to a decision, there is only one opportunity cost! (the cost of our decision) Opportunity Cost – The best thing we give up to get what we want

What else influences your choices?
People make decisions based on their marginal utility, or the extra satisfaction they gain from one additional unit of a good/service. Law of Diminishing Marginal Utility says that as we get or do more of something, the pleasure we derive from it tends to decrease and so does our willingness to buy it or do it!

Finally… Why it Matters
Understanding the opportunity costs/tradeoffs of different choices in life makes you a better decision-maker! Today’s Message – “There’s No Such Thing As a Free Lunch” You always have to give something up…” ALL Individuals, Businesses, & Societies have to consider tradeoffs/opportunity costs when making decisions Ex. Entrepreneur who uses a building to sell car insurance Ex. Homeowner purchases new carpet Ex. Government provides universal healthcare to its citizens Because limited resources, businesses could buy something else or consumer could have used time to do something else BECAUSE THERE ARE ALWAYS ALTERNATIVE USES FOR LIMITED RESOURCES, EVERY ECONOMIC DECISION HAS AN OPPORTUNITY COST As consumers, must realize the “cost” of buying an item is not really the price, rather it is the most valued item that cannot be bought As producers, the opportunity cost is the next most valuable good or service that is not produced as a result of the decision to produce something else Why It Matters Today Sometimes opportunity costs can vastly exceed the sticker price of an item. Imagine you scored a ticket to the Super Bowl. You paid $200 for your ticket, a stretch for your budget but worth it for a once-in-a-lifetime opportunity. You sit down in your seat next to some schmuck who admits he paid $5000 to a scalper for his ticket. Five grand! That's madness. But hold on. Your ticket just cost you five grand, too, even though only $200 in cash ever left your wallet. How's that work? Well, if the schmuck next to you was willing to buy a seat for $5000, then you could have sold yours at that price, too. The opportunity cost of you using your ticket is the five grand you didn't make by scalping it. Hope it was a good game! Trade-offs create opportunity costs, one of the most important concepts in economics. Whenever you make a trade-off, the thing that you do not choose is your opportunity cost. To butcher the poet Robert Frost, opportunity cost is the path not taken (and that makes all the difference). You bought that bike? Then the snowboard was your opportunity cost. Decided to work on the Fourth of July? Your opportunity cost was a relaxing day hanging out with the fam at the BBQ. Everything has opportunity costs. If you just bought something, you could have always chosen to buy something else instead. If you just chose to spend your time in a particular way, you could have always done something else. "Something else" is your opportunity cost.

Visualizing the Relationship…
Limited Resources & Unlimited Wants Scarcity Trade-offs (choices) Opportunity Costs

Objectives/Essential Questions
I will be able to understand (and teach!) the three different types of economies Essential Question: How do the different types of economies work?

How Can We Measure What We Gain and Lose When Making Choices?
Answer: With a Production Possibilities Frontier

Production Possibilities Frontier
Diagram representing the possible combinations of goods and or services an economy can produce when all resources are being fully employed

PPF Assumptions We live in a two good world There are fixed resources There is fixed technology Resources are not specialized

Production Possibilities Curve
OUTPUT OF CONSUMER GOODS (units per year) OUTPUT OF MILITARY GOODS (units per year) A B O Limited resources necessitate choices about WHAT to produce. C D F X E G

The Choices Nations Make
A nation must choose what to do with its scarce resources during war or periods of military buildup. Produce military goods or consumer goods?

OUTPUT OF CONSUMER GOODS
Economic Growth Production possibilities increases with more resources and technology OUTPUT OF CONSUMER GOODS (units per year) 1900 production possibilities 2000 production possibilities OUTPUT OF MILITARY GOODS (units per year)

The Classic Guns and Butter example:
10,000 20,000 30,000 40,000 50,000 100,000 95,000 85,000 70,000 At point A, all resources are used for butter A Moving from point A to point B requires shifting resources out of butter and into guns. B C D At point F. all resources are used for Guns. The classic example of the production possibility curve, which demonstrates the idea of opportunity cost. In a theoretical economy with only two goods, a choice must be made between how much of each good to produce. As an economy produces more guns (military spending) it must reduce its production of butter (food), and vice versa. If the society maximizes its security by producing guns, sacrifices the living standards by not producing enough butter (a consumer good) E F

Productivity A PPF can help us see how efficient our choices are.
Productivity - measurement of how efficiently we are utilizing our resources Is this the same as production? An economy producing on the curve = using their resources to produce the MAXIMUM amount of goods/services Success in maximizing the allocation of our resources is also measured by productivity. For economists, this is a crucial measurement of how efficiently we are utilizing our resources. Productivity measures how much we produce for every unit of labor or capital that we invest—or as economists say, the value of our output for every unit of input. Suppose, for example, that in your one-man furniture shop you produce one chair every hour. With hopes of increasing productivity, you hire three assistants. Now you can produce four chairs per hour. But while your production may have increased, your productivity has not—you are still only producing one chair for every hour of labor invested. So you decide to buy some new machinery and soon discover that you and your three assistants can now produce eight chairs per hour. You have doubled productivity. Yeah technology! Entrepreneurs and countries’ leaders strive for greater productivity! Why? Productivity – the value of our output for every unit of input (in other words: how efficiently resources are being used!) To be more productive we must: Create more output with same inputs Create same output with less inputs How to increase productivity = 1. Division of Labor 2. Specialization 3. Investing in Human Capital Efficient use of productive resources is productivity (Productivity always goes up when same output can be produced with less inputs or more output is created with same inputs) Productivity – output/input Specialization (productive inputs do whatever talk they are able to do best - example carpenter specializes in building a house, not electrician or plumber)and division of labor (takes place when workers perform fewer tasks more frequently - assembly line technique) may improve productivity because they lead to more proficiency (and greater economic interdependence). Investing in human capital (sum of skills) improves productivity because when people’s skills, abilities, health, and motivation advance, productivity increases.

Locations on a PPF Efficient Point: place where an economy is achieving as much output as possible from a given amount of resources – occurs at any point on the curve. Inefficient Point – place where the economy is not functioning as it could be – occurs at any point inside the curve Unattainable Point – place where the economy cannot produce, given its current resources – occurs at any point outside the curve Inefficient points represent an attainable, production possibility but it is less efficient = due to natural disaster or slowdown in economy & more unemployment Unattainable because at curve all resources are being used to the max!

STRAIGHT-LINE PPFs Constant O.C.
Food O.C. between 1 and 2 computers = 1 Food Unit 4 O.C. between 3 and 4 computers = 1 Food Unit 3 2 1 1 2 3 4 Computer Constantly giving up the same quantity of food to get additional computers

BOWED-OUT PPFs Varying/Increasing O.C.
That is, as we specialize more and more into one product, the opportunity costs of producing that product increase, because we are using more and more resources that are poorly suited to produce it As a society attempts to produce more of a good, the O.C. of additional units generally increases Since resources are specialized, we have to give up more of Good A to get additional units of Good B As you move along the curve you are giving up larger amounts of a good/service in order to produce an additional unit of the other good/service mainly because not all of the resources can be used in the exact same way Example – maybe we have land that used to house a computer factory and now cannot grow crops Principle of Increasing Costs: As a society produces more of one product, the O.C. of producing that product increases because we are using more resources that are poorly suited to produce it.

Economic Systems An economic system is the way a society coordinates the production and consumption of goods & services. How a society answers the three basic economic questions determines which type of economic system they are! Three Types of Economic Systems: Command Traditional Market

Jigsaw activity You will be placed in groups of 3 and assigned a type of economy You will have 7 minutes to read and come up with 4 key components After the 7 minutes… 1’s go to the front of the classroom 2’s go to the wall nearest the door 3’s go to the wall nearest the courtyard

Economic & Social Goals of an Economic System
Economic Freedom Economic Efficiency Economic Equity Economic Security Economic Stability Economic Growth All economic systems have certain economic/social goals and values, each may however emphasize or place greater importance on one rather than another, these goals help to decide what type of economic system they are Economic freedom, or the freedom for people to make their own economic decisions without gov’t interference, is a goal highly valued in the United States. Economic efficiency means that resources are used wisely and that the benefits gained are greater than the costs incurred (no wasting). -Most economic systems strive for full employment, or providing as many jobs as possible. Economic equity is the goal that involves the fair and just distribution of society’s wealth Economic security is a social goal that results in programs to help support the ill, the elderly, and workers who have lost their jobs. Ex. Social Security. – support those needing food, shelter, health care Economic stability, prices are predictable, jobs stable and products available Economic growth is an important goal because populations tend to increase and existing populations tend to want more goods and services. = allows for higher standard of living

Review of Economic Systems
A traditional economy relies on custom and tradition to dictate production and consumption In a command economy, decisions about production and consumption are made by a powerful ruler or central authority In a market economy, individual producers and consumers coordinate economic activity.

Rarely do countries utilize just one of these categories, usually it is a mix of 2!

What are the most important goals of each economic system?
Traditional Security and Stability Command Equity and Security MARKET Efficiency and Freedom **Societies differ in the degree of importance they attach to each goal. Progress toward one goal can sometimes be achieved only at the expense of another (TRADEOFFS!)** Traditional – security & stability Command – Equity & security Market – Efficiency & Freedom

Which economic system does the U.S. use?

The American Economic System
We have a mixed market economy! COMMAND MARKET

The U.S. mixed economy In a mixed economy… Individuals: Government:
Own the factors of production Possess freedom to produce or consume Must operate under confines of law Government: Protects workers and consumers Regulates business and preserves competition Provide public goods/benefits Protector – 40 hour work week, sensible working conditions, health benefits, agencies like FDA regulates medicine & food to protect consumer Regulator – Sherman Anti-Trust Act of 1890 prevents monopolies (wants to preserve competition), regulates SS/welfare/unemployment (these protect people too!)

Think back… What does this remind you of from the beginning of the unit???

U.S. Economic System Characteristics
1. Economic freedom (“laissez-faire”) 2. Limited government 3. Equal opportunity 4. Competition 5. Profit motive 6. Property Rights 7. Binding Contracts Our economy needs a balance of freedom for individuals but also protection! 1. “Let them do” –people and businesses make their own economic choices. relatively free of government intervention, allows us to act within our best interest within the law (can’t sell alcohol to underagers or hire child labor, free to own most productive resources and start new businesses 2. Free to compete with one another, but all involves risk, among sellers helps lower prices. Same legal rights to seek profit and consumption in a marketplace Government laws & agencies regulate but not operate most of businesses Incentive to keep rewards so produce better products or produce more, encourages entrepreneurship and is largely responsible for the growth of a free enterprise economy. Right to buy, sell, & control use of our property (including intellectual) - You can do what you want with it, unless gov’t takes away for public use but must be fairly compensated – patents & copyrights (motivate people to be creative & succeed!)

Understanding how all parts fit together
Circular Flow of Economic Activity Represents a market economy 2 main “markets” Product Market:  Factor Market: where goods and services where the 4 factors of are bought/sold production are bought/sold Shows interdependence between businesses and individuals

Marriage Vows CONGRATULATIONS! The government and the economy are renewing their marriage vows. You are cordially invited to the ceremony but this perfect couple needs your help! Using what you have learned this unit and using the textbook. You will explain the way government and the economy are connected (made for each other). You will demonstrate this answer in the format of wedding vows. You must use at least 5 of the following words Producers Taxes Consumers Restrictions Markets Freedom Goods/Services Limited Look back to U.S. Economic System Characteristics Each set of vows must be at least 6 lines.

Do you remember ?

Write the following question down:
Why does the United States have a democracy and mixed economy?

Foundations of Government and Economics

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