Ms. Ramos Unit 2 Economic Decision Making Ms. Ramos Alta Loma High School

Ms. Ramos Why is what we want scarce? Ms. Ramos

Our Wants Always Exceed our Resources  Even the rich have to deal w/ scarcity  Resources are limited, ex: Time Time Money Money Ms. Ramos

With resources limited, scarcity is everywhere  Ex: land, labor, materials- are people willing to turn these over for free?  Scarcity would exist even if everyone was rich! What if everyone wanted to build a home on the beach? What if everyone wanted to build a home on the beach? Ms. Ramos

Shortages are temporary, while Scarcity is forever  Most of us have experienced a shortage  Many reasons for shortages  Shortages are temporary, scarcity is forever!!! Ms. Ramos

What’s this a picture of? Katrina. This led to what shortage? Gasoline and other southern products

Ms. Ramos How do we satisfy economic wants? Ms. Ramos

 Look around the room….what do you see?  Share with a neighbor  All of the goods were produced to satisfy somebody’s wants Ms. Ramos

Inputs, Outputs, and the Production equation  Inputs: scarce resources that go into the production process  Factors of production (FofP) are divided into 3 categories Land, labor, capital Land, labor, capital  Outputs: G& S produced using FofP Ms. Ramos

Production Process Inputs Output (G&S) Ms. Ramos

Land resources the “gifts of nature”  Land is more than real estate Air, soil, minerals, water, plants, animals Air, soil, minerals, water, plants, animals  Natural resource vary in abundance Perpetual: widely avail Perpetual: widely avail Sunlight & windSunlight & wind Renewable: can be replaced as used Renewable: can be replaced as used Forest, fishForest, fish Nonrenewable: once used-gone Nonrenewable: once used-gone Oil, coal, natural gasOil, coal, natural gas Ms. Ramos

What are “natures gifts” in a pencil? httpbattellemedia.comarchives200903search_is_a_pencil_ Ms. Ramos

httpbattellemedia.comarchives200903search_is_a_pencil_ Nature’s gift in a pencil Wax Clay Graphite Cedar Wood Castor Oil (in paint) Zinc Rapeseed Oil Pumice Rubber Copper Ms. Ramos

Labor Resources: Putting Human Capital to work  Labor: Time & effort to produce G&S for wages  Quantity depends on pop & willingness  Quality depends on skill  Human capital: knowledge & skill from educ & training - IMPORTANT!!! Ms. Ramos

 Strong correlation btwn a country’s level of human capital and standard of living Japan- poor in resources, but rich in human capital- among wealthiest nations Japan- poor in resources, but rich in human capital- among wealthiest nations Nigeria- rich in oil, poor in human capital- among poorest nations Nigeria- rich in oil, poor in human capital- among poorest nations Ms. Ramos

Gary Becker Nobel Prize winner  Estimates about 75% of the wealth of a modern economy consists of the education, training and skills of its people - TCI: Econ Alive! The Power to Choose - TCI: Econ Alive! The Power to Choose Ms. Ramos

Capital Resources: Tools, Machines, and Buildings  Financial capital: money  Physical capital: tools, machines, buildings used in the production process Ms. Ramos

 Is a car capital? No if for personal use. No if for personal use. Yes if used to deliver product Yes if used to deliver product Ex: pizza business/restaurant buys car to deliver foodEx: pizza business/restaurant buys car to deliver food The school van is a capital good- it is used to carry out the “production of education”The school van is a capital good- it is used to carry out the “production of education” Ms. Ramos

Putting it all together: Entrepreneurship  Combines land, labor, & capital to produce goods  Roles of Entrepreneurs Innovator-idea Innovator-idea Strategist- vision & decisions Strategist- vision & decisions Risk Taker- invest not knowing outcome Risk Taker- invest not knowing outcome Sparkplug- energy Sparkplug- energy Ms. Ramos

Working Smarter Boosts Productivity  How does one compute productivity? Output divided by input Output divided by input  Can be raised two ways- efficiency More output from input (labor produces more lumber) More output from input (labor produces more lumber) Same output from fewer inputs (more lumber from tree) Same output from fewer inputs (more lumber from tree) Ms. Ramos

Output: total board feet of lumber Input: total hours of labor Productivity: Feet of lumber produced per hour Ms. Ramos

Factors Of Production LandLaborCapitalEntreprenuership Ms. Ramos