What has been around since the beginning of tim ime and is even - - PowerPoint PPT Presentation

What has been around since the beginning of tim ime and is even more prominent today?

What has been the driving force behind virtually every le leader & nation in in their im imperialistic quests?

What has been the cause of more wars, hostile takeovers, coup de ta’s, and entrepreneurial endeavors?

What has fuele led capitalism and free markets since… well…forever?

STUFF!!!

The desire for more…

Answer:

But… There’s just one problem.

Do you know what it is?

There’s NOT enough stuff to satisfy the ever increasing desire for…

Answer:

MORE!!!

That is called…

SCARCITY

Scarcity is is defined as:

Unlimited wants & desires in intersecting wit ith li limited resources. In other words…

There’s just not enough stuff to fulfill everyone’s needs, wants, and desires.

The science and study of f how individuals, , businesses, governments and nations make choices about the most effective use and allocation of

• f

limited re resources in ord rder to satisfy fy unlimited wants and needs.

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

The Economic Way of Thinking

Six Principles

• 1. People Choose

• 2. People’s choices involve costs.

Rational Decision Making

Rational decision making is a multi- step process for making choices between alternatives.

Rational Decision Making - Application

• Decide on TWO Goals – they can be academic, personal, professional/work

related, sports related, etc… that you would like to accomplish by the end of the semester.

• For each goal, make a list of the things or tasks you will need to do each day in
• rder to accomplish both goals and how much time each day you think you will

need to devote to each individual item/task for each goal. Note, the frequency of some tasks may be daily, every other day, weekly, etc…

• Next, make a list of the things you now do each day and the time devoted to each.

For example, school, work, leisure activities, sports, family commitments, etc…

• Now, take the weekly calendar worksheet and enter each task, when it is done

(daily, every other day, etc…) and the time devoted to it. See the example…

Rational Decision Making - Example

• School – Mon – Fri 730-330
• Work – MWT- 5-8 & Sat 12-7
• Sport/Music Practice – Tues 5-7
• Sleep…
• Church…
• Study…
• Hang with friends…

Rational Decision Making

Based on your list of tasks, the items you do each day, the amount of time that must be devoted to those items as well as to those you must do to accomplish your goals…

Can you do everything?

Why not?

What are you going to have to do? How do you decide?

• 3. People respond to incentives in predictable

ways.

• High Test Scores
• Good Grades and GPA
• Money & Salaries
• Good Job & Career
• Stuff, Stuff, & More Stuff!!
• Better Future for Family
• Recognition
• Popularity

• 4. People create rules that influence individual

choices and incentives.

• 5. People gain when they trade voluntarily.

• 6. People’s choices have future implications.

• 6. People’s choices have future implications.

An unintended consequence of an economic action.

EXTERNALITY

An unintended consequence of an economic action.

Economic Way of f Thinking

• 1. People choose.
• 2. People’s choices involve costs.
• 3. People respond to incentives in predictable ways.
• 4. People create rules that influence individual choices and incentives.
• 5. People gain when they trade voluntarily.
• 6. People’s choices have consequences that lie in the future.

The science and study of f how individuals, , businesses, governments and nations make choices about the most effective use and allocation of

• f

limited re resources in ord rder to satisfy fy unlimited wants and needs.

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Scarcity

• Share
• Lottery
• Contest
• Personal

• Authority
• Force
• First-come,

• Price
• Majority

• f the producer/provider of goods

PRODUCCR

PRODUCT MARKET FACTOR MARKET

HOUSEHOLDS

BUSINESSES

Payments Money Money Payments Service & Goods Services & Goods Factors of Production Factors of Production Income & Wages Wages Income &

Own all of the factors of production. BUY in the Product Market & SELL in the Factor Market. BUY in the Factor Market & SELL in the Product Market.

PRODUCCR

PRODUCT MARKET FACTOR MARKET

HOUSEHOLDS

BUSINESSES

Payments Money Money Payments Service & Goods Services & Goods Factors of Production Factors of Production Income & Wages Wages Income &

Own all of the factors of production. BUY in the Product Market & SELL in the Factor Market. BUY in the Factor Market & SELL in the Product Market.

GOVERNMENT

Taxes Taxes

Money Payments Factors of Production Money Payments Goods & Services

Public Goods & Services Public Goods & Services

PRODUCCR

PRODUCT MARKET FACTOR MARKET

HOUSEHOLDS

BUSINESSES

Payments Money Money Payments Service & Goods Services & Goods Factors of Production Factors of Production Income & Wages Wages Income &

GOVERNMENT

Taxes Taxes

Public Goods & Services

Money Payments Money Payments Goods & Services Factors of Production

Public Goods & Services

Georgia Standards of Excellence CONCEPT CLUSTER

SSEF5 Describe the roles of government in the United States economy.

• a. Explain why government provides public goods and services,

redistributes income, protects property rights, and resolves market failures.

• b. Explain the effects on consumers and producers caused by

government regulation and deregulation.

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Broad Social Goals

• f an Economy

Economic Efficiency Economic Equity Economic Freedom Economic Growth Economic Stability Economic Security

Broad Social Goals of an Economy

Economic Efficiency

Economic efficiency means… allocating scarce productive resources to produce the goods and services that people want and using inputs in a manner that keeps production costs as low as possible.

Economic Equity

Economic equity means… what is “fair.” Economic actions and policies have to be evaluated in terms of what people think is right or wrong. Equity issues often arise in dealing with the distribution of income and wealth. To some, equity means providing equal

• pportunity; to others, equity means equal
• utcomes.

Economic Equity

Equality Is about Fair Rules Not Final Scores

https://youtu.be/cwVQ7TI6K7M

Economic Equity

GET IN GROUPS OF FOUR Take the next 5 minutes and list as many public policies as you can the are intended to promote Economic Equity. NOTE: The same policy and/or program used twice will cancel out.

Economic freedom means… allowing consumers (citizens) to decide for themselves how they will spend their income, generate their income, and ultimately to decide how they will allocate their own financial resources.

Economic Freedom

Economic Growth

Economic growth means… increasing the production of goods and service over time. Economic growth is measured by changes in the level of real Gross Domestic Product (rGDP). A target annual growth rate of 3 percent to 4 percent in real GDP is generally considered reasonable and sustainable.

Gross Domestic Product

GDP is the total value of the final goods and services produced in a country in

• ne year.

(Measure of Output)

Economic security means… protecting consumers, producers, and resource owners from risks that exist in society. Each society must decide from which uncertainties individuals can and should be protected, and whether individuals, employers, or the government should provide or pay for this protection.

Economic Security

Question: What type of Economic Security is being depicted in the “Wall Street” movie clip?

Public Policies

• Requiring health insurance by all members of society.
• Indoor smoking laws that prohibit smoking to improve air quality.
• Tariffs imposed on imported clothing to protect domestic

manufacturers of clothing.

• Requiring motorcycle riders to wear helmets.
• Taxing wage income.
• Shortening the length of time unemployment benefits may be

collected.

• Taxing sodas that contain excessive amounts of sugar.

Economic Security

GET IN GROUPS OF FOUR Take the next 5 minutes and list as many public policies as you can, other than those listed in the previous slide, the are intended to promote Economic

• Security. Each member of the group

with the most after 5 minutes will receive 5 points class cash. NOTE: The same policy and/or program used twice will cancel out.

Economic stability means… no massive swings in the output growth of a nation’s economic system as well as avoiding inflation and deflation.

Economic Stability

What, again, is the definition of Inflation? Price level increase from year to year.

Economic Stability

Economic stability is accomplished through…

Legislative/Executive Branches

The Federal Reserve

What are your questions?

Domain 1

FUNDAMENTALS of

Economics is…

scarc rcity forcing us to make decisions about allocating limited resources to meet our unlimited needs, wants, and desires. Our enduring understanding…

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.

An Opportunity Cost is…

the most desirable benefit given up to take another course of action.

Trade-Offs, on the other hand are…

all of the alternatives that we give up up whenever we choose one course

• f action over others.

The Factors of Production…

• Land All natural resources that are used to produce goods and

services.

• 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.

• Entrepreneurship the skills to organize & effectively utilize the

production factors

Goods/Services ∞ Producers/Consumers

People use these 4 productive resources to produce goods and services that other people want (hopefully) and will consume. The producer then earns a profit if the production costs are less than the selling price that consumers are willing and able to pay.

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Natural Resources

All natural resources that are used to produce goods and services.

Human Resources

Any effort a person devotes to a task for which that person is paid.

Capital

Any human-made resource that is used to create

• ther goods and

services.

Entrepreneur

the skills to organize & effectively utilize the production factors

Section 1 Review

• 1. What is the difference between a shortage and

scarcity?

• (a) A shortage can be temporary or long-term, but scarcity always exists.
• (b) A shortage results from rising prices; a scarcity results from falling prices
• (c) A shortage is a lack of all goods and services; a scarcity concerns a single item.
• (d) There is no real difference between a shortage and a scarcity.
• 2. Which of the following is an example of using physical

capital to save time and money?

• (a) hiring more workers to do a job
• (b) building extra space in a factory to simplify production
• (c) switching from oil to coal to make production cheaper
• (d) lowering workers’ wages to increase profits

Section 1 Review

• 1. What is the difference between a shortage and

scarcity?

• (a) A shortage can be temporary or long-term, but scarcity always exists.
• (b) A shortage results from rising prices; a scarcity results from falling prices
• (c) A shortage is a lack of all goods and services; a scarcity concerns a single item.
• (d) There is no real difference between a shortage and a scarcity.
• 2. Which of the following is an example of using physical

capital to save time and money?

• (a) hiring more workers to do a job
• (b) building extra space in a factory to simplify production
• (c) switching from oil to coal to make production cheaper
• (d) lowering workers’ wages to increase profits

Scarcity & Allocating Limited Resources

How to figure out what to get, who gets what, etc..? (ALLOCATION STRATEGIES)

• First Come, First Served
• Price
• Personal characteristic
• Majority Rule
• Competition
• Force
• Sharing
• Lottery
• Authority

What allocation strategy did we see in the movie clip?

Scarcity and the H1N1 Virus

Background

• In 2009 a mini-epidemic of “swine-flu” broke out

across the country

• Swine flu is a severe form of flu that combines a mix
• f several viruses
• The symptoms are similar to regular flu, just much

more severe

• The news began reporting deaths from swine flu in

September, which signaled a flurry of people wanting the H1N1 vaccine

Problem?

• The production of the H1N1 vaccine had been

significantly delayed for multiple reasons

• Only 14% of the orders of the vaccine were being

filled at one point

• In several places riots broke out at health clinics

where people were told there was not enough

Problem?

• The FDA eventually released a statement saying that

while the disease was dangerous for everyone, it was MOST dangerous to the following groups: “Pregnant women, people living with or caring for infants, emergency medical personnel and healthcare workers, children and young adults from 6 months to 24 years and any adult with chronic medical conditions”

Decision Time!

You are the manager of a local health clinic. You have 3 doses of the H1N1 vaccine left. The following 9 people come to you for help, to which 3 will you give the vaccine?

Who gets the vaccine?

• Jake, a 45 year old widowed male with

3 young children at home. He is willing to pay triple your price

• Kelly, a divorced 35 year old mother of

2 middle school-aged children who works two jobs to make ends meet

• Monique, a 75 year old female who

has lived in this community all her life with government health insurance

• Fred, a 45 year old former Olympic

gold medalist with a heart condition who does much charity for the community, but has very little money

• Tiara, a 2 year old who easily contracts

colds and sickness

• Brooke, a 35 year-old mother of 3 who is

4 months pregnant

• Jo, a 29 year old healthy EMT who actually

helped save your grandmother’s life last year

• Tyrone, an 18 year old track star with a

full ride scholarship to a major university

• Arthur, a 85 year old retired military

veteran who recently suffered a stroke, but is recovering

How do we allocate resources?

• First Come, First Served
• Price
• Personal Characteristic
• Majority Rule
• Competition
• Force
• Sharing
• Lottery
• Authority

What are your questions?

Grab an iRespond.

It’s time for a…

Georgia Standards of Excellence CONCEPT CLUSTER

SSEF2 Give examples of how rational decision making entails comparing the marginal benefits and the marginal costs of an action.

• marginal cost
• marginal benefit

SSEF3 Explain how specialization and voluntary exchange influence buyers and sellers.

• Specialization
• Voluntary Trade

Markets…

• How do we define Marginal cost, marginal benefit, and

specialization?

• How do free markets operate?
• How can markets regulate themselves?
• What are the advantages of a free market economy and

voluntary exchange?

Marginal Cost is…

the cost added by producing

• ne additional unit of a

product or service

WIDGETS Cost of Production Qty Produced $100 10 $105 11

$5

Marginal Benefit is…

additional satisfaction or utility that a person receives from consuming an additional unit of f a good or service

Marginal Benefits and Costs

• Economic decisions are always made on the basis of marginal costs

and marginal benefits.

• For example, we don't make decisions between spending the entire

day watching TV or the entire day studying.

• Instead, we choose between spending a little more time studying and

a little less time watching TV, or vice versa.

• So a decision between studying and watching TV involves comparing

the marginal benefit of studying with the marginal benefit of watching TV, not comparing their total benefit.

• The total benefit of studying could be far greater than the total

benefit of watching TV, but after several hours of studying, the marginal benefit of studying could be less than the marginal benefit

• f watching TV.

Specialization is…

a business, , area or economy focuses on the pro roduction of f a limited scope of f pro roducts or r services to gain greater degrees

• f

f pro roductive efficiency within an

• verall system

Voluntary Exchange is…

Free, mutually beneficial, , and non- fr fraudulent exchange of goods and services between buyers and sellers in the marketplace.

The Market’s Self-Regulating Nature

• In every transaction, the buyer and seller consider only their self-

interest, or their own personal gain. Self-interest is the motivating force in the free market.

• Producers in a free market struggle for the dollars of consumers.

This is known as competition, and is the regulating force of the free market.

• The interaction of buyers and sellers, motivated by self-interest

and regulated by competition, all happens without a central

• plan. This phenomenon is called “the invisible hand of the

marketplace.”

Advantages of the Free Market…

Economic Efficiency

• As a self-regulating system,

a free market economy is efficient. Economic Growth

• Because competition

encourages innovation, free markets encourage growth. Economic Freedom

• Free market economies have the

highest degree of economic freedom of any economic system. Additional Goals

• Free markets offer a wider

variety of goods and services than any other economic system.

What are your questions?

Quick Quiz…

• 1. Why do people need to buy and sell goods or services?

(a) People need to buy and sell goods to make a profit. (b) People buy and sell to maintain a competitive society. (c) No one is self-sufficient. (d) People need to provide the market with goods and services.

• 2. What factors create the phenomenon of the “invisible hand”?

(a) incentives and efficiency (b) specialization and efficiency (c) competition between firms (d) competition and self-interest

Georgia Standards of Excellence CONCEPT CLUSTER

SSEF4 Compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce.

• Economic Systems
• The three basic economic questions

Economic Systems

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Economic Systems

People create rules for trade that fall along a continuum between command and market.

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Economic Systems

Command Market

A Parking Lot Full of Incentives

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Output Goal

Fill the lot.

Output Goal

Commrades - Drivers of small and medium cars complain that they are unable to find parking. As a result, I am changing the output goal. Your reward will be according to how many cars you park – the more cars in the lot, the greater the reward.

Output Goal

Commrades - Drivers of medium cars continue to complain, and they being joined by many drivers of large cars. As a result, I am changing the output goal again. As before, your reward will be according to how many cars you park – the more cars in the lot, the greater the reward – however, you must have the same number of small, medium and large cars in your lot. Devise your parking plan.

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

In Incentives Matter

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

Economic Systems

Command Market

ec·o·nom·ics ˌekəˈnämiks,ˌēkəˈnämiks/

What are your questions?

Georgia Standards of Excellence CONCEPT CLUSTER

SSEF6 Explain how productivity, economic growth, and future standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people.

• Productivity
• Investment in Capital Tools
• Investment in Human Capital

Productivity

Describes the relationship of inputs (factors of production) to outputs (products & services).

1950, the average U.S. corn farmer was able to harvest 39 bushels of corn from an acre of land.

2009, the average U.S. corn farmer was able to harvest 165 bushels

• f corn from an

acre of land.

In 1950 the average amount of milk per cow was 5,314 pounds per year. (one cow=500 pounds of milk)

In 2009 the average amount of milk per cow was 20,848 pounds per year.

(one cow=500 pounds

• f milk)

Average U.S. farm output in 1950 Average U.S. farm output in 2009

Essential Question : How in the world did farmers get so good in the last 50 years? Answer: technology/productivity

When examining farming (1950 v. 2009), how has technology affected productive resources? Land Labor Capital

How can workers increase their productivity?

• 1. Invest in Capital Goods/Resources

• 2. Invest in Human Capital

Production Possibilities Graphs

• What is a production possibilities graph?
• How do production possibilities graphs show

efficiency, growth, and cost?

• Why are production possibilities frontiers curved

lines?

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.

A point INSIDE the PPF shows a system that is NOT working at maximum efficiency. A point OUTSIDE the PPF shows an impossibility as it exceeds the capabilities of the system/economy.

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

• perating efficiently.

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.”

Cost

A production possibilities graph shows the cost of producing more of one item.

What is the cost to move from point c to point d on the graph above?

Cost

To move from point c to point d on this graph has a cost of…

3 million pairs of shoes.

Section 3 Review

• 1. A production possibilities frontier shows

(a) farm goods and factory goods produced by an economy. (b) the maximum possible output of an economy. (c) the minimum possible output of an economy. (d) underutilization of resources.

• 2. An economy that is using its resources to produce

the maximum number of goods and services is described as

(a) efficient. (b) underutilized. (c) growing. (d) trading off.

Section 3 Review

• 1. A production possibilities frontier shows

(a) farm goods and factory goods produced by an economy. (b) the maximum possible output of an economy. (c) the minimum possible output of an economy. (d) underutilization of resources.

• 2. An economy that is using its resources to produce

the maximum number of goods and services is described as

(a) efficient. (b) underutilized. (c) growing. (d) trading off.

What are your questions?