Economics TEKS 5 & 6 BY ZACK RUIZ & Scarlett McNeil

Assignments Week 3 TEKS 5 TEKS 5. What are the concepts of scarcity and opportunity costs? The student is expected to: (A) explain why scarcity and choice are basic problems of economics, and (B) interpret a production-possibilities curve and explain the concepts of opportunity costs and scarcity. TEKS 6. What is the circular-flow model of the economy? The student is expected to: (A) interpret a circular flow-model of economy and provide real word examples to illustrate of the model, and (B) explain how government actions affect the circular-flow model.

What Are Economic Problems? The economic problem refers to the defect of goods. There is only a limited amount of resources available to produce the unlimited amount of goods and services we desire.

What Are Production Possibilities Curve? All resources are applied and fixed means that all land, capital, labor, and entrepreneurship are being applied to produce goods and services; and what quantity of those resources we currently have are all we are going to get. We are also assuming that technology is “fixed.”

What are the concepts of opportunity costs and scarcity? Scarcity Opportunity costs and trade-offs Scarcity is caused by having relatively unlimited wants but only limited resources Scarcity requires people to make choices about using resources to satisfy wants Opportunity cost is the highest valued alternative that is disqualified by choosing an option All economic decisions involve opportunity costs Weighing the costs and benefits of alternatives is the nature of effective economic decision-making

What Is the Circular-flow Model of the Economy and Dose It Do? In America, and in all basically capitalist systems we rely on a complex theoretical model to tell us this whole free enterprise thing works. This model is called the Circular Flow Model. What the circular flow model tells us is that three basic elements of the economy will work and interact together to ensure that our needs and wants are provided for. There are three basic elements, or what are referred to as sectors, of the economy that must interact.

Circular flow basically shows us that input from each sector and to each sector spurs on production and thus goods and services are created. Here is a graphical representation of circular flow:

How do government actions affect the circular-flow model? The government affects the circular flow by providing certain benefits to households, and providing certain benefits to businesses. Even though households and businesses pay the government it still gives them certain benefits.