Chapter 1 What is Economics?

1. Chapter 1 What is Economics? S1: Scarcity and Factors of Production S2: Opportunity Cost S3: Production Possibilities Curves

2. Bell Work: S1 (10 minutes) Get book, folder, and texts Pick up Chapter 1 and Unit Worksheets 3 hole punch them and place in Folders Answer A – E on Unit 1 Essay Warm-up Pgs. 29-30

3. Section 1: Scarcity and Factors of Production • Chapter 1 Essential Question • Need to be able to answer this!! • “How can we make the best economic choices?” Write at top of S.1 notes • Objectives to learn • Why scarcity and choice are the basis of economics • What entrepreneurs do • 3 factors of production and differences bt human/physical economics • How scarcity affects the factors of production

4. Key Terms • Turn to page 2 • Slideshow on Web • http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13-369833-5/Flash/Ch01/Econ_OnlineLectureNotes_ch1_s1.swf

5. Why are scarcity/choice basis of economics? • How does Scarcity force people to make economic choices? • Makes everyone make choices by making us decide which options are most important to us • Scarcity states there are limited goods/services for unlimited wants. • People need to make choices in order to satisfy m/i wants • People satisfy their needs/wants w/ goods/services • People’s needs/wants are unlimited, goods/services are not

6. Why are scarcity/choice basis of economics? • Economics begins w/idea that people cannot have everything they want/need • The fact that limited amounts of goods and services are available to meet unlimited wants is called scarcity. • Scarcity forces people to make choices but it is not the same as a shortage. • Shortages are temporary while scarcity always exists.

7. What do entrepreneurs do? • Entrepreneurs play a key role in turning scarce resources into goods/services • Willing to take risks in order to make a profit • They:…. • Develop original ideas • Start businesses • Create new industries • Fuel economic growth • 1st Task is to assemble factors of production • Land • Labor • Capital

8. Factors of Production: Land • Refers to all natural resources used to produces goods/services • Resources include: • Fertile land for farming • Oil • Coal • Iron • Water • Forests

9. Factors of Production: labor • Labor is the effort people devote to tasks for pay • Labor includes: • Medical care provided by a doctor • Instruction provided by a teacher • Tightening of a bolt by an assembly-line worker • Creation of painting by an artist • Repair of television by technician

10. Factors of Production: capital • Refers to any human-made resource that is used to produce other goods/services • Economy requires both human/physical capital • Physical • Buildings • Equipment • Tools • Human • College education • Training • Job experience

11. Benefits of capital • Key factor for production b/c people and companies can use it to save time/money • Benefits of capital • Increased efficiency • Increased knowledge • Better time-management • Increased productivity

12. Scarce Resources • Checkpoint: Why are goods/services scarce? • Goods/services are scarce b/c the resources used to produce them are scarce • Only so many natural resources available to produce goods • Labor for production can be limited • Physical capital can be limited for many industries • Each resource may have alternative uses • People, businesses, govt.s must choose which alternative they want most

13. Lesson closing • Entrepreneur simulation on Pearson • Class Demonstration • Go back and answer the Chapter Essential Question • “How can we make the best economic choices?” • Found on page 4 of Chapter Warm-up • A-D • Homework • Read Section 2: pgs. 8-12

14. Section 2: Bell Work Get books, folders 2 Choices; Grab scratch paper and copy “bubble” chart on pg. 8 Put “bubble” chart at top of S.2 notes Answer Questions to captions on pg. 5 and 9 Think, pair, share

15. S.2: Opportunity Cost • Guiding Question • How does opportunity cost affect decision making? Write at top of S.2 Notes • Objectives to learn • Why every decision involves trade-offs • The concept of opportunity cost • How people make decisions by thinking @ the margin • Key Terms • http://www.pearsonsuccessnet.com/snpapp/iText/products/0-13-369833-5/Flash/Ch01/Econ_OnlineLectureNotes_ch1_s2.swf

16. How does opportunity cost affect decision making? • Every time we choose to do one thing, we are giving up the opportunity to do another • When we make decisions about how to spend our scarce resources, like money/time, we give up our chance on something else • All indiv’s, businesses, and large groups make decisions that involve trade-offs • Trade-offs involve things easily/not easily measured • Money, property, time, and things not easily (enjoyment or job satisfaction)

17. How does opportunity cost affect decision making? • Businesses and Govt. trade-offs • Businesses make trade-offs when they decide how to use their factors of production • Famer uses land to plant corn, cannot use same land to plant soybeans • Govt’s make trade-offs when they decide to spend money on military needs instead of domestic, or vice-versa • Checkpoint: What are trade-offs? • Answer economics and you from BW

18. What is opportunity cost? • Most trade-offs have one of the “rejected” alternatives being more “desirable” than rest • That most desirable alternative given up by the decision is the opportunity cost

19. How to people make decisions • Decision making grid • Can help you decide if you are willing to accept the opportunity cost of a choice • Read thru pg. 10 • Answer 2 ?s • Thinking @ the Margin • When you decide how much/less to do you are thinking on the margin • Involves comparing opportunity costs/benefits • Called cost/benefit analysis

20. Thinking at the Margin • Marginal Costs and Benefits • To make good decisions you must weigh the marginal costs against marginal benefits • M.Cost = extra cost of adding one unit such as sleeping or getting one more cookie • M. Benefit = extra benefit from adding one unit such as sleeping or getting one more cookie • Once the marginal costs outweigh the marginal benefit, no more units can (or will) be added • Example: 1 more cookie is o.k. b/c it is only 35 more calories but once the unit cost (calories) exceeds what the benefit (satisfaction) is you will not add anymore. • Best example is how often you tell yourself you can “sleep just ____ much longer” before there is a cost you aren’t willing to put up with

21. Cost/benefit analysis • Read and answer figure 1.1 on making decisions at the margin • Answer the 2 ?s • Decision making at the margin • Like opportunity cost, thinking at the margin applies to businesses/governments as well • Employers think @ margin when they decide how many workers to hire • Legislators think @ margin when they decide how much to increase govt. spending on a project

22. Lesson Closing • Trade-off worksheet • Complete and have ready for tomorrow • Complete pg. 5: Chapter Essential ? • “Scarcity, choices, and you!”

23. Section 3 Bell Work