Scarcity and the Factors of the Production California Content Standards 12.1.1, 12.1.2, and 12.2.8

Economics Is the study of how people seek to satisfy their needs and wants by making choices. What is a need? Air, food, water, or shelter is a need What is a want? A desired item that is not essential

Unlimited Wants & Needs Humans will never be satisfied and will always want or need more; will never be satisfied

Limited Resources There is a limited quantity of resources available Examples? Oil (gas) Water Coal Wood Money (unless you are Bill Gates or Warren Buffet)

Scarcity Is the fundamental Problem of Economics Condition resulting from Society not having enough resources to satisfy its unlimited wants and needs.

Allocation We must choose which of our wants and needs to satisfy with our limited resources.

Trade-Offs Alternative that must be given up when choosing one thing over another. Time with friends over family Money for clothes over food Homework over Television

Opportunity Cost Value of what you could have had instead. Savings for college, instead of a car A better relationship with family, instead of friends An “A” in Economics, instead of…

Opportunity Benefit What is gained by choosing one alternative over another. Saved money for retirement Spent money no retirement

Three Basic Questions of Economics What to produce? Scarce resources Societies must decide How to produce? What we decide to produce? For whom to produce?

What to Produce? Societies must decide what is essential Essential Shelter & Food Modern Societies face additional considerations National Defense Education Public Health

How to Produce? Use of Equipment over people? Electricity Agriculture - Tractors or workers Industrial – Machines or workers on an assembly line Electricity Oil? Solar Power? Nuclear Power? Water Power? What will determine factors of production? Land, Labor, Capital Goods and services

How to Produce? One acre of land + 56 worker hours + simple hand tools = 15 bushels of wheat One acre of land + 2.9 worker hours + Mechanical farming equipment = 40 bushels of wheat What is a bushel of wheat? One bushel of wheat = one million kernels and can yield 60 pounds of whole wheat flour

Whom to Produce? Societies decide how to distribute goods through their economies Farmer makes a decision Produce too much lower prices, too little not enough supply Who would you produce for? Rich, poor, both, women, men Who does Ferrari, Gucci, Burberry produce for? Why?

Economic Systems How a society answers the three questions Command Traditional Mixed Economy Market

Command (Communism) All economic decisions made by the government. Production Health care Jobs North Korea (Kim Jong-il Cuba (Raul Castro)

Traditional Customs, Habits, Rituals Little room for innovation or change Defined roles (boys follow fathers, girls their mothers) Agriculture and hunting practices are key Not a stable economy against the effects of environmental disasters

Mixed Economy Combines individual choice with government regulation and spending Individuals can own businesses, government regulates policies United States Canada Germany Sweden

Mixed Economy Sweden’s Opportunity Benefit Opportunity Cost Government redistributes more than half of Sweden’s wealth through social programs Parents are entitled to 450 days of parental leave Patients rarely pay more than 1,800 kronor ($230) per year for prescriptions Employers are required to give a minimum of 30 days vacation Opportunity Cost Second highest tax burden of any industrialized country. 56 percent of what they make to taxes; 32 percent in the U.S.

Market Individuals and Businesses act in their own best interests No Government Involvement (Laissez-Faire) Let the market correct itself Hong Kong Virtually no barriers on foreign trade Banks operate independently from the government