Introduction to Economics Scarcity How we deal with not having enough stuff

Food For Thought By graduating from high school, how much more money will you make than someone who doesn’t graduate over your lifetime? $283,500, or about $9,500 a year!

More Food For Thought By graduating from college, how much more money will you make than someone who doesn’t graduate from high school over your lifetime? $918,000 or about $30,000 a year!

What is Economics? Def: The study of how people satisfy their wants and needs. We tend to use money to purchase our needs and wants. Bartering (trading one thing for another) and making yourself are other methods.

What are NEEDS? Needs are the things that a person has to have to survive. – Food – Water – Shelter The BARE NECESSITIES!

What are WANTS? Wants are things that you would like, but do not need to survive.

Scarcity Def. A limited amount of resources to meet unlimited wants and needs.

Why do we have Scarcity? We have unlimited wants and needs But Limited Resources Create Scarcity So we need to make Choices What to produce, how to produce, for whom to produce

Causes of Scarcity 1. Personal Perspective: your own feelings of what is needed or wanted. – “I’m starving!” – “I’m broke!”

Causes of Scarcity (Cont.) 2. Poor distribution of resources: not using your resources to their potential. – “I never have any time- yet I watch 6 hours of television a day!” – “I don’t have enough money for college, but I have to have a pair of $200 sneakers!”

Causes of Scarcity (cont.) 3. Rapid increase in demand: A sudden rush to use resources can cause a shortage – Tickle Me Elmo – X-Box – Beanie Babies

Ways we deal with Scarcity 1. Doing without something – “Shut-up kid- you’ll get nothing and like it” – “I’ll go to the prom, but not on the senior trip.” – “Instead of driving to the theater, let’s watch a movie on cable and save gas money”

Ways we deal with Scarcity (cont.) Creating more resources – “I’ll get a second job” – “We’ll drill for more oil in Alaska”

Ways we deal with Scarcity (cont.) 3. Making better use of our resources – While I watch television, I’ll grade papers” – “I’ll take my date to a matinee movie and use a buy one get one free coupon for dinner!” – “If we carpool to work, it’ll save gas money”

Real Costs Def. All of the resources used to produce a good or service. Most resources can be used for only one thing at a time.

Example of Real Costs Real costs of building a bridge instead of a building – Construction workers (cannot work on building a new building) – A crane (Cannot be used to build a new buidling) – Steel (used in the bridge, cannot bue used in a new building)

Trade Offs Def. When you choose between two possible uses for a resource, giving up one alternative for another. Ex. Bridge vs. Building I can buy this book or pizza, but not both

Opportunity Costs When you make a trade off, there are costs. The value of time, money, goods, and services given up in an economic choice. The #1 alternative is the Opportunity Cost. By doing this, I give up the opportunity to do that. – If we build the bridge, we cannot build the building – If I buy the pizza, I can’t buy the book

Trade off: Sleep vs. Study OptionsBenefitOpportunity Cost 1 hour of extra study timeGrade of C on a test1 hour of sleep 2 nd hour of extra study time Grade of B on a test2 hours of sleep 3 rd hour of extra study timeGrade of B+ on a test3 hours of sleep

What is the Opportunity Cost of Going to College? Benefits – Higher income – More job opportunities – Job opportunities in a career I enjoy – Job opportunities in more places Opportunity Costs – Costs a LOT of money – Student loans for years – 4 (or more) years of school – No guarantee of a job when I get out – What if I change my mind?