One measure of value is utility A service is buying a new car Date your paper and copy the following statements down in your spiral notebook True False _____ _____ One measure of value is utility A service is buying a new car A service is teaching Specialization means every worker makes the entire product Human capital is the production of human body parts, used to help injured soldiers in times of war 1.2

Which would be considered a durable good, a nondurable good or a service? Car wash Gasoline T.V Set DVD Blouse Magazine Course in first aid Box of cereal Lawn mower Eye exam Bus ride CD Service Nondurable Durable

Value A worth that can be expressed in dollars and cents For something to have value it must: Be scarce Have utility Capacity to be useful Capacity to provide satisfaction This may vary from person to person

Paradox of value Adam Smith asked: Why is it that sometimes needs are less valuable than wants? Shouldn’t water be more valuable than diamonds?

Paradox of Value (aka the diamond–water paradox) the apparent contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. What might change this paradox between diamonds and water?

wealth Includes: All products that are tangible Scarce Useful Transferable Which of the following are counted as a part of wealth? Car wash Gasoline T.V Set DVD Blouse Magazine Course in first aid Box of cereal Lawn mower Eye exam Bus ride CD

Assignment and homework Finish the vocabulary for 1.2 (PP 15 – 17) Market Factor Market Product Market Economic Growth Productivity Human Capital Division of Labor Specialization Economic interdependence

An opportunity cost is the same as a trade off Date your paper and copy the following statements down in your spiral notebook True False _____ _____ An opportunity cost is the same as a trade off A production possibility frontier is a diagram that shows combinations Free enterprise system is what we have in the US The study of economics helps people make better choices Opportunity costs are incurred when trade-offs are made. 1.3

Did you know… The 20 percent of the world’s people who live in the wealthiest nations consume 86 percent of the world’s goods and services. The 20 percent who live in the poorest nations consume just 1.3 percent. The U.S. Consumer The United States, with less than 5 % of the global population, uses about a quarter of the world’s fossil fuel resources—burning up nearly 25 % of the coal, 26 % of the oil, and 27 % of the world’s natural gas. As of 2003, the U.S. had more private cars than licensed drivers, and gas-guzzling sport utility vehicles were among the best-selling vehicles. New houses in the U.S. were 38 % bigger in 2002 than in 1975, despite having fewer people per household on average.

1.2 Assessment Why might a wealthy society not have as much economic staying power as another wealthy society with a highly skilled labor force?

The Circular Flow of Economic Activity Markets are locations/mechanisms for buyers and sellers to trade. They are classified as local, regional, national, global, and cyberspace.  A factor market is where people earn their incomes. Factor markets center on the four factors of production: land, capital, labor, and entrepreneurs.  A product market is where people use their income to buy from producers. Product markets center on goods and services.

Circular flow of economic activity

Productivity and Economic Growth Productivity is a measure of the amount of output produced by the amount of inputs within a certain time. Productivity increases with efficient use of scarce resources.  Specialization and division of labor may improve productivity because they lead to more proficiency (and greater economic interdependence).

Productivity and Economic Growth Investing in human capital improves productivity because when people’s skills, abilities, health, and motivation advance, productivity increases.  Economic growth depends on high productivity. Yet, an economy’s productivity may be affected by its interdependence—reliance on others and their reliance on us to provide goods and services.

Name that econ. term Condition of not having enough resources Sum of those economic products that are tangible, scarce, useful and transferable People with all their efforts, abilities and skills Wealth Scarcity Good Labor Value Economics Standard of living Paradox of value Capital Trade-off Opportunity cost

Name that econ. term Worth that can be expressed in dollars and cents Study of how people try to satisfy their need through the careful use of scarce resources Tools, equip, machinery and factories used in the production of goods and services Wealth Scarcity Good Labor Value Economics Standard of living Paradox of value Capital Trade-off Opportunity cost

Analyze trade-offs and opportunity costs. Objectives for 1.3 Analyze trade-offs and opportunity costs. Explain decision-making strategies.

Introduction The process of making a choice is not always easy. Section 3 The process of making a choice is not always easy. Because resources are scarce, consumers need to make wise choices. To become a good decision maker, you need to know how to identify the problem and then analyze your alternatives. Finally, you have to make your choice in a way that carefully considers the costs and benefits of each possibility.

Did you know Economists reward their greatest for breakthrough discoveries. The 1999 Nobel Prize for Economics went to Robert A. Mundell, a Canadian economist at New York’s Columbia University, for his career-long work in international currency exchange rates, vital in today’s global marketplace. The prize is worth a million dollars in U.S. currency.

Trade-Offs and Opportunity Cost Trade-offs are the alternative choices people face in making an economic decision. A decision-making grid lists the advantages and disadvantages of each choice.  Opportunity cost is the cost of the next best alternative among a person’s choices. The opportunity cost is the money, time, or resources a person gives up, or sacrifices, to make his final choice.

Trade-Offs and Opportunity Cost (cont.)

Production Possibilities The production possibilities frontier diagram illustrates the concept of opportunity cost. It shows the combinations of goods and/or services that can be produced when all productive resources are used. The line on the graph represents the full potential—the frontier—when the economy employs all of these productive resources.  Identifying possible alternatives allows an economy to examine how it can best put its limited resources into production.

Production Possibilities (cont.) Considering different ways to fully employ its resources allows an economy to analyze the combination of goods and services that leads to maximum output.  An economy pays a high cost if any of it resources are idle. It cannot produce on its frontier and it will fail to reach its full production potential.  Economic growth made possible by more resources, a larger labor force, or increased productivity causes a new frontier for the economy.

Production possibilities frontier

Production possibilities frontier

Production possibilities frontier

Thinking Like an Economist Building simple models helps economists analyze or describe actual economic situations. Cost-benefit analysis helps economists evaluate alternatives by looking at each choice’s cost and benefit. Taking small, incremental steps in implementing an economic decision helps economists test whether the estimated cost of the decision was correct.

Name that econ. term Manufactured goods needed to produce other goods and services Cost of the next best alternative Alternative choices made by consumers Wealth Scarcity Good Labor Value Economics Standard of living Paradox of value Capital good Trade-off Opportunity cost

Name that econ. term Quality of life based on the ownership of the necessities and luxuries that make life easier Situation in which some necessities have little value while some non necessities have a much higher value Tangible item that is economically useful or that satisfies an economic want Wealth Scarcity Good Labor Value Economics Standard of living Paradox of value Capital Trade-off Opportunity cost

Review: Pages 28-29 Review Content Vocabulary #s 1-10 Review the Main Ideas #s 22-28 Critical Thinking #s 30-32 Math Practice #34 Interpreting Cartoons #36