Upload
nen
View
39
Download
3
Tags:
Embed Size (px)
DESCRIPTION
\. ECONOMIC DECISION-MAKING. 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 - PowerPoint PPT Presentation
Citation preview
\
ECONOMIC DECISION-MAKING
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
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.
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.
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_____________________________________________________
• 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?
Scarcity vs. Shortage• Numerous causes for shortages
– Wars, prices, fads, media craze, natural disasters, production problems, labor shortages, strikes, changes in productivity
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
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
Resource Scarcity Game
• 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
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?
What are the elements of an economy that constitute our wants?
Inputs to an OutputPause & 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?
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.
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
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?”
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
Types of ResourcesPause & Process
Organize the following items into 3 categories:• Land (natural resources)• Labor• CapitalZinc 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.
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)
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
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
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
PPCurve/PPFrontier
• http://www.youtube.com/watch?v=JCEWQ_cafUs&list=PLF2A3693D8481F442
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?