1. Learning Goals: Scarcity and the Factors of Production
Explain why scarcity and choice are basic problems of economics.
Identify land, labor, and capital as the three factors of production, and identify the two types of capital.

2. Bell ringer What comes to mind when you hear the word scarce?
What are some items that you think might be scarce?

3. What Is Economics?
Economics is the study of how people make choices to satisfy their wants
For example:
You must choose how to spend your time
Businesses must choose how many people to hire

4. Scarcity and Shortages
Scarcity occurs when there are limited quantities of resources to meet unlimited needs or desires
Shortages occur when producers will not or cannot offer goods or services at current prices
Shortages can be temporary or long-term, but scarcity always exists
Why?
What may cause a temporary shortage for a good?

5. The Factors of Production
Land All natural resources that are used to produce goods and services.
Examples?
Labor Any effort a person devotes to a task for which that person is paid.
Capital Any human-made resource that is used to create other goods and services.

6. The Factors of Popcorn Production
Land
Popping Corn
Labor
The human effort needed
to pop the corn
Capital
Corn-Popping Device
Provide another example of land, labor, and capital
What do you think is the different between physical capital and human capital?

7. Scarcity Activity Do you think that time can be considered a resource?
Consider whether or not time is a scarce resource
Create a chart that shows how, in a typical weekday, you allocate the 24 hours available to you.

8. Learning Goals: Opportunity Cost
Describe why every decision involves tradeoffs.
Explain the concept of opportunity cost.
Explain how people make decisions by thinking at the margin.

9. Bell ringer
Choose ONE of the following vacation destinations and be prepared to explain your choice:
Hawaii
Puerto Vallarta, Mexico
Paris, France
The Bahamas
Las Vegas

10. Trade-offs and Opportunity Cost
Trade-offs are all the alternatives that we give up whenever we choose one course of action over others.
Examples for individuals?
Examples for businesses?
Examples for society (guns vs. butter)?
The most desirable alternative given up as a result of a decision is known as opportunity cost.
Write a definition of opportunity cost in your own words and provide examples from your own life

11. The Decision-Making Grid
Economists encourage us to consider the benefits and costs of our decisions.
Benefits
Enjoy more sleep
Have more energy during the day
Better grade on test
Teacher and parental approval
Personal satisfaction
Decision
Sleep late
Wake up early to study for test
Opportunity cost
Extra study time
Extra sleep time
Benefits forgone
Wake up early to study
Alternatives
Karen’s Decision-making Grid

12. Thinking at the Margin
When you decide how much more or less to do, you are thinking at the margin.
Decisions aren’t always “all or nothing”
Options
1st hour of extra study time
2nd hour of extra study time
3rd hour of extra study time
Benefit
Grade of C on test
Grade of B on test
Grade of B+ on test
Opportunity Cost
1 hour of sleep
2 hours of sleep
3 hours of sleep

13. Decision Making at the Margin
Decide whether to work 2, 4, or 6 hours at an after- school job by comparing the opportunity cost and benefit of each alternative.

14. Global Trade-Offs
How can the same decision made in two different countries have vastly different opportunity costs?

15. Learning Goals: Production Possibilities Graphs
Identify key points on a production possibilities curve.
Demonstrate how production possibilities curves show efficiency, growth, and cost.
Explain why a country’s production possibilities depend on its available resources and technology.

16. Production Possibilities
A production possibilities graph shows alternative ways that an economy can use its resources.
The production possibilities frontier is the line that shows the maximum possible output for that economy.
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph
a (0,15) 15 8 14
b (8,14) 14 18 20 21 12 9 5
A production
possibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0)

17. Shoes (millions of pairs) Watermelons (millions of tons)
Efficiency
Efficiency means using resources in such a way as to maximize the production of goods and services. An economy producing output levels on the production possibilities frontier is operating efficiently.
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14) S
g (5,8)
A point of underutilization

18. Shoes (millions of pairs) Watermelons (millions of tons)
Growth
Growth If more resources become available, or if technology improves, an economy can increase its level of output and grow. When this happens, the entire production possibilities curve “shifts to the right.”
Give specific examples of what would cause shifts to the right and left.
Shoes (millions of pairs) 25 20 15 10 5
Watermelons (millions of tons)
Production Possibilities Graph T
Future production
Possibilities frontier
c (14,12)
d (18,9)
e (20,5)
f (21,0)
a (0,15)
b (8,14) S

19. Watermelons (millions of tons) Shoes (millions of pairs)
Cost
Cost A production possibilities graph shows the cost of producing more of one item. To move from point c to point d on this graph has a cost of 3 million pairs of shoes.
Watermelons (millions of tons)
Shoes (millions of pairs) 25 20 15 10 5
Production Possibilities Graph 14 18 21 12 9 8
c (14,12)
d (18,9)

20. Problem Solving
How would you illustrate the impact of each of the following events on a productions possibilities curve for factory goods and farm goods?
The computer is invented
1 million farm workers remain unemployed for six months
A drought