Bellwork1. What do you expect to learn in

Economics?2. What is your job as the Economics

student?

Cornell Note Taking is emphasized here at THSEssential Question: What is Economics?

Questions Notes

Summary: Economics is the study of how people choose from limited resources to meet their needs and wants.

Introduction to Economics

1. Scarcity and Factors of Production2. Opportunity Cost

Essential Question: How do we allocate limited resources?

Making Choices

Need- something like food, air, shelter, water (necessary for survival)

Want- item we desire—not essential to survival

CAN’T HAVE EVERYTHING YOU NEED OR WANT—YOU HAVE TO MAKE CHOICES!!

Essential Question: How do we allocate limited resources?

What Is Economics? Economics is the study of how people seek

to satisfy their needs (essentials) and wants (desires) by making choices.

Decisions have costs. Economics studies the costs, benefits, expectations and results of choices.

For example: You must choose how to spend your time Businesses must choose how many

people to hire

Essential Question: How do we allocate limited resources?

Scarcity and Shortages Scarcity occurs when

there are limited quantities of resources to meet unlimited needs or desires

ALL GOODS AND SERVICES PRODUCED ARE SCARCE.

Shortages occur when producers will not or cannot offer goods or services at current prices

Can be long-term or short-term.

Holiday seasons Wars and droughts

Scarcity versus Shortage

What is the difference?•

Essential Question: How do we allocate limited resources?

The Factors of Production Land All natural resources that are used to

produce goods and services. Labor Any productive physical or mental

effort a person devotes to a task for which that person is paid. Workers, laborers.

Capital Any human-made resource that is used to create other goods and services. Physical Capital- machinery and

equipment made by labor to increase the productivity of labor.

Human Capital- the knowledge and skills that makes labor more productive.

Essential Question: How do we allocate limited resources?

The Factors of Popcorn Production

Land

Popping Corn

Vegetable Oil

Labor

The human effort needed to pop the corn

Capital

Corn-PoppingDevice

Essential Question: How do we allocate limited resources?

The Economic Problem What goods and services should an

economy produce? – should the emphasis be on agriculture, manufacturing or services, should it be on sport and leisure or housing?

How should goods and services be produced? – labour intensive, land intensive, capital intensive? Efficiency?

Who should get the goods and services produced? – even distribution? more for the rich? for those who work hard?

Essential Question: How do we allocate limited resources?

Opportunity CostDefinition – the cost expressed in

terms of the next best alternative sacrificed

Helps us view the true cost of decision making

Looks at what is given up when a decision is made.

Implies valuing different choicesEssential Question: How do we allocate limited resources?

FIVE appealing VACATION Destinations…

Hawaii ParisDunns River

Falls, Jamaica

AlaskaIreland

Volunteer: What is your first choice? What is your second choice?

Making Economic DecisionsMaking Economic Decisions1st Choice is what you would choose to do

2nd Choice is your opportunity cost (you give it up to do option 1)

Essential Question: How do we allocate limited resources?

How does opportunity cost affect decision making?

Trade Offs Trade-offs are all the alternatives that we give

up whenever we choose one course of action over others.

The most desirable alternative given up as a result of a decision is known as opportunity cost.

“Time for money and wheels”-get a part time job (time) in order to get a car

Marginal Thinking Process of deciding whether to use a resource Cost /benefit analysis-what you will sacrifice

Essential Question: How do we allocate limited resources?

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 • Better grade on test• Teacher and parental approval• Personal satisfaction

• Enjoy more sleep• Have more energy during the day

Sleep late Wake up early to study

Alternatives

Karen’s Decision-making Grid

Essential Question: How do we allocate limited resources?

Thinking at the Margin When you decide how much more or

less to do, you are thinking at the margin.

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 ofsleep

3 hours of sleep

Essential Question: How do we allocate limited resources?

http://www.youtube.com/watch?v=PSU-_n81QT0