Introduction to Economics Unit 1 Notes Introduction to Economics

How is Economics defined by scarcity? Unit One, Lesson One Notes How is Economics defined by scarcity?

What is economics? Economics comes from the idea that people CANNOT always have what they want and what they need So, ECONOMICS is the study of how people seek to satisfy their needs and wants by making CHOICES

Scarcity & Choice What is a need? What is a want? Need: something that is necessary for survival Want: item that is not needed for survival Because you can’t get everything you want or need, you must… MAKE CHOICES!! Why must we make choices? Because resources are scarce!! What resources are scarce in our everyday lives? Water, food, oil

All of the goods and services we produce are scarce. Goods: physical objects Examples: shoes, shirts, cars, pencils, etc. Services: actions or activities that one person performs for another. Examples: haircuts, tattoos, dental checkups, etc.

Section 1: Scarcity & Choice Scarce/scarcity: limited resources for unlimited wants (Scarcity always exists). Scarcity is NOT the same as a shortage. Shortage is a temporary (sometimes long-term) lack of goods or services. ECONOMICS IS ALL ABOUT SOLVING THE PROBLEM OF SCARCITY!! HOW DO WE FULFILL WANTS/NEEDS WITH FEW RESOURCES? Video Clip

Section 1: Scarcity & Choice Why do you think economists say that scarcity always exists? Because our needs and wants are always greater than our resource supply!

Economics in my Life Occupations: http://classroomedition.com/cre/ http://occupations.careers.org/ http://www.kids.gov/6_8/6_8_careers.shtml Pay: http://www.payscale.com Mortgage Calculator: http://www.mortgagecalculator.net

Unit One, Lesson Two Notes What are the 3 Factors of Production and why are they important to consider in our economy?

Factors of Production Economists call all the resources that are used to make all goods and services FACTORS OF PRODUCTION The factors of production are land, labor, and capital

Factors of Production Also called factor resources. They consist of: Land Labor Capital

Land All natural resources used to produce goods and services. Examples are: land, water, wood, wind, sun, cotton, etc.

Labor The effort that a person devotes to a task for which the person is paid. Examples are: medical assistant, assembly line worker…just about any job you can think!

Capital Physical capital-buildings, tools, etc. Both of these are needed to produce goods and services in our economy!! Physical capital-buildings, tools, etc. Human capital-knowledge and skills a worker gains through education and experience.

Physical capital example Suppose a family of 6 wash dishes by hand every day for every meal (breakfast, lunch, dinner) – 21 meals per week. It takes 30 minutes per meal for 2 people to wash the dishes. That’s 21 hours per week spent washing dishes. Now, let’s say that the family buys a dishwasher for $400. Now it takes 1 person 15 minutes per meal to clean all the dishes. This takes 5 ¼ hours per week.

Case Study: Mark Zuckerberg

Did his risk pay off? Goal was to create online social network for students- for free. Worked with venture capitalists. One offered $500,000 to work on Facebook full time. That fall, they had over six million members. Six months later, Zuckerberg and his partner got $12.7 million more in funding. Members like, advertisers love. By 2008 had more than 70 million users. Growth=more jobs

Feel free to use the Internet to find all of the resources! ACTIVITY You will illustrate the factors of production in the making of fast food French fries. (You cannot imagine how much goes into those tasty things!!) You can choose any GOOD! You can work alone or in pairs (no more than 2). You will create a poster with a diagram or a PowerPoint presentation to share with the rest of the class. Each factor must include a minimum of 3 examples but a total of 15 items. Land Labor Capitol (you can show a combination of human and physical capitol)

Feel free to use the Internet to find all of the resources! ACTIVITY Refer to the following websites as a guide: http://www.rense.com/general7/whyy.htm http://www.gladwell.com/2001/2001_03_05_a_fries.htm http://www.potatopro.com/Newsletters/20081021.htm http://www.usatoday.com/money/industries/food/2006-06-08-wendys-usat_x.htm

Factors of Production: Fast Food Fries Feel free to use the Internet to find all of the resources! ACTIVITY Your illustration may look something like this: Both physical and human capital French Fries (ex. field, water) Land Labor (farmers) Capital (tractor )

Factors of Production Of Peanut Butter! http://peanut-butter.org/peanut-butter/How+Peanut+Butter+is+Made

Land Soil to help the plants grow Peanut Plants to make the peanuts Farms to harvest peanuts Water to help the plants grow Air to help the peanuts dry out

Labor Farmers harvest the peanut plants. “Shellers” at manufacturing plants remove excess dirt and debris. Peanut butter manufacturers receive the fresh peanuts and begin the process of turning them into peanut butter. Other factory workers who grind, process and package peanut butter.

Capital The peanut farmers who plant and harvest the peanuts. machines which start by pulling the plants from the ground, breaking away the roots, and shaking out excess soil. When the dried plants are harvested, they are placed in wagons and given additional drying time, Then, they are inspected by the Federal or State Inspection Bureaus for quantity and valuation purposes. The blancher machine removes the outer skins by lightly rubbing the peanuts between two belts. Additives that include salt, sugar, and hydrogenated vegetable oil The jar to fill the peanut butter up with!

If there is not enough for everybody, how do you make a choice? Unit One, Lesson Three Notes If there is not enough for everybody, how do you make a choice?

Entrepreneurs If land, labor, and capital are the essential ingredients for creating all goods and services, who pulls those resources together? The answer: entrepreneurs Entrepreneurs are ambitious leaders who decide how to combine land, labor, and capital resources to create new goods and services

Scarcity Economists say that all goods and services are scare because the land, labor, and capital used to create them are SCARCE This means that the land, labor, and capital to produce them are SCARCE

Trade-offs Economists say that all people, even government, make decisions that involve TRADE-OFFS TRADE OFFS are all the alternatives that we give up whenever we choose one course of action over another EVERY decision that is made involves trade-offs

OR

Trade-offs Decisions that business people make on how to use land, labor, and capital involve trade-offs Normally one decision is more desirable than all the other decisions Do you wake up early and study or do poorly on the test and get extra sleep?

Trade-offs Economists simplify their explanations of the trade-offs countries face by using the example of guns or butter For example, if a country produces more military goods (guns) they will have less resources to devote to consumer goods (butter)

Opportunity Cost This leads to opportunity cost Opportunity cost is the most desirable alternative that is GIVEN UP as a result of a decision Essentially, OPPORTUNITY COST is what you’re willing to SACRIFICE as a result of your decision Because of SCARCITY one cannot do both decisions – a CHOICE must be made

Thinking at the Margin Thinking at the margin involves adding or subtracting a unit from the decision that involves opportunity cost This does not allow one to take an all or nothing approach So, do you wake up 30 minutes early instead of 1 hour to study? This allows more decisions for one person to choose

Decision-making This decision making process is sometimes called COST/BENEFIT ANALYSIS Anytime a decision is made economists realize that one has to compare opportunity costs and benefits (what will be sacrificed and what will be gained) This is ECONOMICS