1. ECONOMIC DECISION-MAKING\
ECONOMIC DECISION-MAKING

2. Why are goods scarce?
Make a list of 5 things you wish you had right now – it can be anything.
What is stopping you from having the goods you listed?
People are never TRULY happy with goods
Due to people’s unlimited wants – want more
Even those who have it all want things better or faster or bigger

3. Scarcity Unlimited Wants chasing limited resources
Different for everybody
Value placed on resources in one country may be different than value placed on same resource in another country.
“Basic needs” defined differently from one place to another.

4. Scarcity
Scarcity caused by limited resources used to create those goods and services
There is nothing that we have an unlimited supply of – NOTHING
Money and wealth in the end do not matter
There will always be something you cant have.

5. Scarcity vs. Shortage Scarcity vs. shortage
Scarcity – limited resources/unlimited wants – there’s only so much.
Shortages – a short term deficit of a good
Always a temporary situation
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What do you think causes shortages?
Write your thoughts on your note sheet
Compare your answer with someone near you
What are some examples of shortages you can think of?

6. Scarcity vs. Shortage Numerous causes for shortages
Wars, prices, fads, media craze, natural disasters, production problems, labor shortages, strikes, changes in productivity

7. Shortage or Scarcity
You have to take the bus to school because your mom and dad have the cars
You have to buy a Kiwi Strawberry smoothie on Friday instead of Peach
You pay over $500 for an original Nintendo gaming system

8. Choices In economic terms, we refer to choices as trade-offs.
The process of making these choices involves a cost-benefit analysis
These can be complex equations or a simple question of “what do I give up in order to get this other thing I want”.
Costs – what must go into getting the product/outcome
Benefit – what is gained from the decision
Cost Benefit Analysis = Looking at what is spent versus what is earned from a potential decision

9. Resource Scarcity Game

10. What are the elements of an economy that constitute our wants?
Inputs and Outputs
Inputs: scarce resources that go into the process = the factors of production
Land
Labor
Capital
Outputs: goods & services produced using these resources

11. What are the elements of an economy that constitute our wants?
Production Equation:
Land + Labor + Capital = goods & services
Some economists consider entrepreneurship – the willingness to take risks involved in starting up a business – a fourth factor of production
Can you name any famous entrepreneurs?

12. Inputs to an Output Pause & Process in Pairs
Think of a product – any product you want
Write it down – this is your OUTPUT (your good)
List ALL the materials you would need to create this good
Share with a partner your product and the inputs required.
See if they have any items that you may have forgotten
Add these to your list
Which inputs would be considered scarce?
What can you assume about the Production Equation from the information you have for this activity?

13. Types of Resources: Land
Land resources – known as “gifts of nature”
Includes natural resources – ore, lumber, metals
Includes actual real estate land
Can also include solar, geothermal or wind energy
Known as Perpetual Resources – those that wont run out
Renewable Resources – can be replaced
Forests, fresh water, animals/fish, some metals
Nonrenewable Resources – not replaceable
Fossil fuels, natural gas, coal, etc.

14. Types of Resources: Labor
Labor – time/effort of a person towards a good
Consists of two types of labor
Physical Labor – actually using your body to produce
Mental Activity – writing legal briefs, comp programs, etc.
Quantity of labor depends on population and their collective desire to work

15. Types of Resources: Labor
Human capital – the knowledge and skill/ability a person has
There is a value to the skills a person has
What skills do you have that are valuable?
Human capital is extremely important
Higher human capital = higher productivity and pay that can be earned
Strong correlation b/w human capital and standard of living
How could you INCREASE your “human capital?”

16. Types of Resources: Capital
Two types of capital resources
Financial capital – money to purchase inputs
Most commonly thought of when referring to capital
Physical capital – tools, machines and buildings
Also known as capital goods
Capital goods come in many forms
Computers, screwdrivers, cars, etc.
Capital replaces the use of labor
Changes human capital because people need to be trained in these new machines, gaining human capital

17. Types of Resources Pause & Process
Organize the following items into 3 categories:
Land (natural resources)
Labor
Capital
Zinc Plumber Copper Engineer Coal Waitress Water Architect Oven Mechanic Sales Clerk Computer Sunlight Uranium Hammer Factory Calculator Scissors Sand Paper Diamonds Animals Telephone Trees Solar panel X-Ray machine Landscape Designer Teacher Assembly line worker
Let’s say you ordered a large cheese pizza from Dominos last night….list all the resources (natural, human and capital) that went into making and delivering the pizza to your home.

19. Improving Productivity
With all factors of production being scarce, people cannot produce everything they want
Must find a way to produce more with less
Productivity – Outputs/ inputs
Ex. 600 boards/ 10 trees = 60 boards/tree (productivity)
Two ways to increase production
Decrease inputs and get same output
600 boards from 9 trees (from new cutting style)
Increase outputs from same input
650 boards from 10 trees (from more efficient saws)

20. Maximizing Utility People need to make tough decisions to benefit
People want to be as best off as possible
Utility – satisfaction or pleasure gained from using a product or service or from an action
Buying a cheeseburger for $1 = full but not best burger ever
Also includes benefit from non pleasurable actions
Vaccinations keep people healthy but are unpleasurable
Maximizing utility is difficult
Never enough information to make perfect decision
Also tough to predict the future

21. Tradeoffs & Opportunity Cost
Tradeoffs made by individuals and societies
Guns v. Butter Tradeoff – to pay for protection or food
One maximizes security, one maximizes goods
Opportunity Cost – what it costs to give up the next best option
Making only trucks v. cars – lose the car sales
People use matrices to help w/ decisions
Marginal Utility – extra benefit of one more
Usually depends on how much you already have
1st one, great; 2nd okay; 3rd has no use – no utility
Negative Utility – one more actually hurts you
Law of Marginal Utility – as consumed good increases, marginal utility decreases

22. Measuring What We Gain/Lose
Production Possibilities Frontier –
Tells us the frontier of what an economy can produce
Shows the possibilities of making two goods
Also shows the potential tradeoffs
Production Possibilities Curve –
Shows the line of what is possibly produced
Curve also measures opportunity cost of decisions
Measuring Efficiency –
By marking what is produced we see efficiency
Measuring Economic Change –
Shows effects of increased technology or growth/ shrinkage in economy

23. PPCurve/PPFrontier

26. Exit Ticket – Day 3 Think of a good or service in your life
In a short paragraph (3-5 sentences) summarize the inputs (land, labor and capital) that would have gone into producing that product.
Finally, answer the following question - IF YOU WERE TO BE AN ENTREPRENEUR, WHAT NEW PRODUCT WOULD YOU CREATE?