1. WELCOME C&E STUDENTS Grab today’s handouts.
Roll Call Question: “Would you rather eat 100 ants or 20 beetles?”
Is your notebook organized?

2. Warm Up
What is the difference b/w something you want & something you need?
What is expensive in our society? Why do you think this is?

3. Unit 5 Personal Financial Literacy
Objective 5.1:
To Identify the basic principles of economics: needs, wants, scarcity, trade off, and opportunity cost.

4. Desert Island
Imagine you are moving to a desert island with no kind of infrastructure.
Write down what you will..
Want
Need

5. I. What is economics Needs and Wants
Need- something necessary for survival
Want- desire not necessary for survival
Economics- the study of how people seek to satisfy needs and wants with limited resources
Macroeconomics= study of economy as a whole and decision making by large units, such as governments or whole industries or societies
Microeconomics= study of behavior and decision making of small units, such as individuals and businesses

6. II. Scarcity
Scarcity-
limited quantity of a resource to meet unlimited wants
This is the driving force of economics
A shortage occurs when producers will not or cannot offer goods or services at the current prices
A shortage and scarcity are not the same thing.
Goods and Services
Goods- physical objects
Services- actions or activities that one person performs for another

7. III. Trade-offs
A resource can only be used once. It cannot be used to produce something else
Trade-off- the process of giving up one desire in order to satisfy another desire
Ex: $100 vs. give girlfriend a present
Ex: 2 more hours of sleep vs. studying for test

8. IV. Opportunity Costs
Opportunity cost- value of what is given up in a trade-off (the next best option)
Ex: Buying the Assassin’s creed game
Cost not having the $60 to spend on something else
Ex: College
cost is $ of college and amount of $ gained from working instead
Remember: “ An opportunity cost is an opportunity lost.”
Immediate gratification- when you give up something in the long-term to satisfy an immediate want

9. What would be the opportunity cost of:
Buying a new iPhone at $299?
Staying home to study on Sunday afternoon?
Having a child while in high school?

10. Why are all goods and services scarce?
Some goods cost more than others
All resources are scarce
Some things are needs and others are wants
Some people want to have more goods than others

11. Of the following scenarios, which is an example of immediate gratification?
An individual spends $ on a pair of shoes instead of putting that money into a savings account
An individual puts money into a savings account to use to buy a car when he turns 16
An individual pays for a gym membership instead of going to the movies
An individual signs up for a credit card to begin building credit

12. Ntbk? Is your note book organized?
All units organized with labeled dividers
All notes are in the proper order & unit section
All handouts are organized in their assigned unit

13. Objective 5.1: Describe the basic factors of production such as land, capital, labor and entrepreneurial skills and their impact on economic activities
What is the difference between a need and a want?
What would be the opportunity cost of buying a $ iPhone?

14. “What Went Into This Candy Bar?”
List everything that went into making this candy bar from the time someone had the idea for the candy until the consumer purchased the candy in the store

15. I. Factors of Production
Resources used to make all goods and services
Land- includes all natural resources
Labor- is the effort that a person devotes to a task for which they are paid
White collar workers- high skilled office work
Blue collar workers- low skill manual labor

16. Capital- any human-made resource used to produce goods or services
Physical capital- goods that include buildings and tools: Hammers, Pizza oven, Factory, computers.
Human capital- knowledge and skills a worker gains through education and experience: Manager, Corporate Accountant, Pizza Chef, Professor etc..

17. D: Entrepreneurs- risk-takers who decide how to combine other factors of production to create new goods and services.

18. LETS LOOK AT OUR CANDY BAR
Land
Labor
Capitol
Entrepreneurship

19. Choices All Societies Face
Unlimited
wants
Limited
Resources
Scarcity
Choices All Societies Face
What to
produce
How to
Produce
For Whom
To Produce

20. In summary: Scarcity forces suppliers and consumers to choose among alternatives and to arrive at affordable decisions

21. II: Economic Systems
The United States operates under a Free Enterprise Capitalism system.
Under this system businesses compete for profit with a minimum of government interference.
Question: How does a citizen’s level of education and training affect a country’s resources?

22. Price is determined by the consumer. “the customer is always right.”
Consumer Sovereignty
Price is determined by the consumer.
“the customer is always right.”

23. I: Consumer Sovereignty
Consumption: the act of consuming or the use of economic goods.
Consumers: the people who buy and use goods and services.
Consumer sovereignty: the power of consumers to decide what gets produced.
Producers have to meet the demands of the consumers or….go out of business

24. II. Revenue & Costs Revenue –income a company receives
Cost –value of money that has been used up to produce a good
Marginal –value of one more item

25. D. Cost-benefit analysis: Economic decision making
Choosing an action when benefits are greater than costs
However, at some point cost may exceed benefit
E. Marginal utility: the first unit of a consumed good is more useful than the next unit consumed
Ex: A Starbucks Grande peppermint $3.89

26. Any resources that are made by humans and used to create other goods and services are called:
entrepreneur
labor
capital
land

27. III. Revenue
Total Revenue: number of units sold multiplied by the average price per unit
100 pizzas x $10.00 = $
Marginal Revenue: Total change in revenue that results from selling one more unit of output
One more pizza sold = $10.00
$ $10.00 = $
Marginal revenue= $10.00

28. IV. Marginal Cost $20/10 cars= $2 per car
To predict the revenue that will come from the goods you produce, you must balance costs & benefits
After figuring out production, you must figure out marginal cost- the price of producing one additional unit
Ex: it takes $20 to produce 10 toy cars
What is the marginal cost of producing one more car?
$20/10 cars= $2 per car

29. Which of following terms refers to the extra or additional cost of producing one additional unit of output?
Total cost
Variable cost
Fixed cost
Marginal cost

30. The income from a full time job that you give up when you go to college is called:
Trade-off
Opportunity cost
Marginal cost
revenue

31. V. Marginal Benefits
Benefits of each item produced usually goes down with each item produced
Marginal benefit- additional benefit of each additional unit produced
Ex: The first 10 toy cars sell for $30
the next 10 toy cars sell for an additional $15
20 toy cars sell for $45
After the first 10 toy cars, what is the marginal benefit of each toy car produced?
First 10- $30/10= $3
Next 10- $15/10 =$1.50

32. Ex: A developer wants to build houses on acres of land near a lake *Houses w/ a lake view cost the most *Value of the land decreases further away from the lake *Declining marginal benefit with each house built beyond a certain point

33. VI. Types of Costs
fixed cost –expenses that are the same no matter how many units of a good are produced
Mortgage payment/rent
variable cost –costs that change with the number of items produced & increase as production grows
Wages
Raw materials
Total costs –fixed costs + variable costs

34. The amount of money a business owner pays for rent or property taxes that does not change is called?
Total cost
Variable cost
Fixed cost
Marginal cost

35. Marginal benefit vs. Marginal cost

36. Warm Up Give an example of a fixed cost.
Give an example of a variable cost.

37. Unit 5.3
Objective:
To identify the costs of production and consumption of goods & services

38. I. Labor and Consumers
Division of Labor- assigning small number of tasks to each worker to increase efficiency
Specialization- workers focus on one activity only, allows them to work faster
Consumption- consuming or use of economic goods

39. Why is division of labor profitable?
It increases efficiency
It increases spending on capital goods
It reduces labor unrest
It protects workers from losing their jobs

40. Consumer sovereignty
power of consumers to decide what gets produced
producers meet demands or go out of business

41. How do consumers affect the products a business produces?
By writing letters to the manufacturer
By buying or not buying the product
By buying goods that are complementary to the product
Consumers have no impact on what products are produced

42. II. Labor and Output
Marginal Product of Labor- change in output from hiring one additional worker
Increasing Marginal Returns- increase return for workers
If there are three tasks in creating a product, MPL increases for each worker hired
Specialization increases per worker hired

43. Diminishing Marginal Returns- decrease in return, if too many workers are added
after first three workers (one for each task), benefits of specialization end
adding more workers increases total output, but at a diminishing rate
MPL decreases as number of workers increases

44. Law of diminishing returns: adding one more factor of production, while holding others constant, will yield lower per-unit returns
Ex: At some point each additional worker will add less output than the worker added before.
See the table on the next slide to illustrate this phenomena. Notice what happens to output as each new person is added to payroll. Is this sustainable and will the company make a profit?

45. Output (pizzas per hour) Marginal Product of Labor
Number of workers
Output (pizzas per hour)
Marginal Product of Labor - 1 4 2 10 6 3 17 7 23 5 28 31 32 8 -1

46. Pizzeria Craziness Breakdown
Pounds Pounds Market Item Supplied Demanded Status olives Shortage flour Shortage tomatoes Shortage onions Shortage cheese Even sausage Even ham Even pepperoni Even garlic Surplus peppers Surplus mushrooms Surplus anchovies Surplus