MR. SOUTHWARD UNIT 1:“FUNDAMENTALS OF ECONOMICS” AND “ECONOMIC SYSTEMS”

ECONOMICS IS DUMB!! WHAT’S THE POINT? Why is it important to take this course and at least be familiar with the basics?

THE FUNDAMENTAL ECONOMIC PROBLEM The overlying problem that faces ALL people is trying to figure out if there is ever enough. When is enough, enough? Scarcity exists throughout all of society; scarcity is the condition that results from society not having enough resources to produce all the things people would like to have.

We all have needs and wants… Needs? Food, Shelter, Water, etc. Wants? Everything else not in the category of a “need”

WHAT IS ECONOMICS? The study of how people seek to satisfy all needs and wants in society by making choices. Why must we make choices? Scarcity. Is anything ever free? No, everything will have some degree of a cost. It can be free to one person, but there will always be a cost. “There is no such thing as a free lunch”

TICKET OUT (AT THE END OF THE CLASS) Think about the term scarcity as we have just learned and now think about what is means to have a shortage of something. Are they the same? Why or Why not?

RESOURCES: FACTORS OF PRODUCTION I want every person in the room to partner up and pick one thing between the two of you and list off all the resources that were necessary in order to produce that product. Try to think of EVERYTHING that go into making that product.

FACTORS OF PRODUCTION Land  “gifts of nature,” or all natural resources Labor  people who use efforts, abilities, and skills to produce the product Capital  tools, equipment, and other human-made products used to create other products. Physical (actual objects) and Human Capital (Acquired Knowledge or skills) Entrepreneurs  The brains who take the resources and finds a way to combine them for a profit. Go back and look at your list and place them in the four categories of Factors of Production.

ENTREPRENEURS

What do they all have in common?

TRADE-OFFS The act of giving up one benefit in order to gain another, greater benefit. They exist through-out all individual, business, and government decisions. Turn to a partner: Individual Trade-off Examples? Business Trade-off Examples? Government Trade-off Examples?

OPPORTUNITY COST Every time we make a choice to do one thing, we give up the opportunity to do something else. When you do make the choice, you reject other options…more importantly you reject the “next best alternative”/ “the one of those alternatives which is better than the rest.” Opportunity Cost basically represents the value/benefits to you of what you were willing to sacrifice. “Choosing is Refusing”

THINKING IN THE MARGIN Scenario : Let’s pretend you just got off of work from the best job ever at SouthSubs, they make the best subs in town. You arrive home at 7:15pm. After settling in and eating dinner, you realize that you have a really hard test tomorrow in your economics class with Mr. Southward. OH NO!!!! At this point in time, thoughts of studying come to mind and how much time you should dedicate to preparation for your test tomorrow. Use the chart below to weigh the benefits and the costs associated with the amount of time you are thinking about studying. Only fill in the benefits and cost columns at this time.

TABLE Hours to StudyBenefits Marginal Benefit CostsMarginal Costs No Studying 1 Hour 2 Hours 3 Hours 4 Hours 5 Hours

What do you obviously recognize after each progressive hour of studying? Marginal means to think about what changes as a part of every extra unit that is considered (in this case, it is the number of hours you plan to study)…there are Marginal Benefits and Marginal Costs. Using your own understanding of the topics, write out an explanation for each of these below.

Go back to the chart on the front page and tell what the marginal benefit and marginal cost will be for each successive units of hours you could plan to study. Now think about the business Southsubs, what decisions do they have to make that require them to “think in the margin?” Give a few examples as a part of your explanation.

THE PRODUCTION POSSIBILITIES FRONTIER Illustrates the concept of opportunity cost; it shows a representation of all the various combinations of goods and/or services an economy can produce when all productive resources are fully employed. In groups of 3 you will be asked to examine and interpret the production possibilities curve in more detail. I will get you started with the drawing of the curve. I would like for each of you to spend 7 to 8 minutes reading individually about the Production Possibilities Curve before you are given your task as a group.

QUESTIONS ON THE PPC Using a red colored pencil or marker, draw 3 dots on the actual curve and label what these dots represent. Underneath your graph, write the number “1” and explain to me in your own words what these points are telling us about an economy. With a blue colored pencil or marker, draw a dot somewhere INSIDE the curve and tell me what that dot represents. Write number “2” and explain in your own words what this point tells us about an economy. What is an example of this? With a green colored pencil or marker draw a second line on the graph which represents growth of an economy. Write number “3” and tell me what are the ways in which an economy is able to grow.

CRITICAL THINKING ON THE CURVE Write number “4” and tell me in a couple of sentences how the graph displays the concepts of opportunity cost and scarcity. Write number “5” and explain to me what you believe the reasons are for the line being curved and not straight. (Hint: think about resources in production of 2 products)

3 QUESTIONS TO ANSWER All economic systems (structure of methods and principles a society uses to produce and distribute goods and services)must ask themselves 3 basic economic question; In your Groups of 3, assign each of the questions to a group member. Each person needs to read about/examine one of these questions to explain an report their notes to the rest of the group. What goods and services should be produced? How should these goods and services be produced? Who consumers these goods and services?

ECONOMIC AND SOCIETAL GOALS In the U.S. there are many economic goals we strive for on a weekly, monthly, and yearly basis. In your groups, you will be asked to examine one of these goals and create a billboard representing/advertising it. Be Creative in your drawings and really think about what this goal means in an economics. Please keep in mind that bill boards aren’t meant to convince the consumer of their product being the best option. Also, on your billboard, you will need to have some kind of statement about the goal to help viewers understand the goal. You will be presenting these to your class mates.

ECONOMIC GOALS OF SOCIETY Economic Efficiency Economic Freedom Economic Security Economic Equity Economic Growth Note: each of these says “Economic” for a reason; please don’t give me a billboard that does not emphasize these in an economic sense of the concept.

ECONOMIC SYSTEMS Reminder: a structure of methods and principles a society uses to produce and distribute goods and services. 4 Major Types: Traditional Free Market Command/Centrally Planned Mixed Market

TRADITIONAL ECONOMIES A system that relies on habit, custom, or ritual to answer the three basic economic questions;

CHARACTERISTICS Revolves around the family unit which could extend the several generations; Work is divided among gender lines along with the occupations; Relatively small and close knit communities; All people work to support everyone in the community, not just individual needs; Not really willing to adopt new ideas Examples: tribes in the Arctic region, in North America and eastern Russia, have maintained their traditional economy

TWO EXTREMES: FREE MARKET AND CENTRALLY PLANNED ECONOMIES Each of you will be partnered up. Your job will be to examine one of the two economic system extremes using the provided diagram. After both students have had plenty of time to read and understand the major points of their specific economies, you will each take turns explaining/discussing the two types of economies to fill in the opposite side of the diagram.

MIXED ECONOMIES Is there any nation today that falls into a purely free market or a purely command economy? No. There will always be some individual choices along with some governmental need…but…to what degree.

REASONS FOR GOVERNMENTAL INVOLVEMENT Some needs can’t be met without central authority: national defense, highway systems, etc. Government desires for the goal of equity to exist: school systems, travel, etc. Protecting the rights and property of people: Stealing physical property and intellectual property In general, to make things fair.

ECONOMIC GOALS DRIVING DEGREE TICKET OUT The degree of mixed market economies is really based off the societies desires in terms of their economic goals; Why? Provide general examples.

THE CIRCULAR FLOW MODEL REVISITED Use the diagram provided to add in the functions of the government in a Mixed Market Economy. Draw a picture to represent the government in the middle of the diagram and then write in the government’s functions in the factor market, the product market, and even the transfers of money. Draw new arrows to show the flow of money and physical objects now that the government is involved.

MIXED ECONOMIES TODAY Many nations are in a period still of economic transition, a period in which a nation moves from one economic system to another. In China’s case, they are dealing with privatization, the process of selling enterprises that were once government owned to individuals and then allowing those enterprises to compete in the market place.