The EconomicWayofThinking

Section 1 Objectives:• explain how the economic definition of

scarcity differs from the common definition• understand why scarcity affects everyone• learn three economic questions that societies

face because of scarcity• describe the four factors of production and

their uses• GLE: Major economic concepts: 1. natural

resources, labor, and capital resources; 2. scarcity; 3. factors of production

Chapter 1—Section 1—pages 4-11

Key ConceptsWants: desires that are satisfied by consuming

good or services. Examples-hunting equipment, cute outfitNeeds: basic needs such as food, clothing, and

shelter thatIs needed to survive.Scarcity: not enough resources to satisfy human

wants.Economics: is a social science that studies how

people choose to useLimited resources to satisfy their wants. Economics involves:1 Examining: how individuals, businesses,

governments, and societies choose to usescarce resources to satisfy their wants.2. Organizing, analyzing, and interpreting data:

about those economic behaviors.3. Developing theories and economic laws that

explain how the economy works and to predict what might happen in the future.

What is Scarcity?

Principle 1: People Have Wants

Choice is part of the use of limited resources. Wants are not only unlimited, they are constantly changing.

Example: Cell phones, computers, flat-screen television.

Principle 2: Scarcity Affects Everyone

Wants are unlimited and resources are scarce. Choices have to be made on how to utilize those resources.

Goods: physical goods in which you purchase. Services: work that one person performs for

another for payment. Example: nurses, doctors, lawyers, etc…

Consumers: people who buy goods or services for personal use.

Producer: person who makes goods or provides services.

Application: Applying Economic Concepts

Identify five wants that you have right now. Describe how scarcity affects your efforts to meet these wants.

What is the economic way of thinking?

How does scarcity affect consumers? Producers? Governments?

Scarcity Leads to Three Economic Questions

Key Concepts: Have you considered if something is worth the money? Scarcity firsthand has been experienced.

Question 1: What will be Produced? As a society decisions have to be

made on what kinds of goods and services will be produced.

Question 2 Question 2: How Will It Be Produced? Societies must decide how goods and

services will be produced. Production is determined on a societies natural resources. Societies also have to consider what kind of labor force they have is it skilled or unskilled.

Question 3 Question 3: For Whom Will It Be Produced? The last question involves how should goods

and services be distributed to consumers. Each society has to develop a system plan of distribution of goods and services. This plan would include; rail and road systems, airports, trucks, ships, seaports, computer networks, which would move goods and services from the producers to consumers in the most efficient system plan.

Application: Analyzing Cause and Effect

Why does the basic problem of scarcity lead societies to ask the three fundamental economic questions?

What is the role of scarcity in each of the three economic questions?

Are efficient methods absolute or relative?

Creating a Simple Product Task: Answer the basic economic

questions by creating a simple product.

Materials: two boxes of colored markers, 24 paper plates, 12 pencils, two staplers, two rolls of transparent tape, 4 scissors, instruction sheets

Activity You will be divided into two groups. Each group will receive task instruction sheets. Groups will have 30 minutes to create products Each group will display what they have

produced and discuss how they answered the first two economic questions.

For discussion, how will each group determine who gets the product.

Compare and contrast the two methods of producing goods.

Scoring GuideUNDERSTANDING OF CONCEPTS

PRESENTATION OF INFORMATION

4: excellent

3: good

2: fair

1: poor

4: clear and complete

3: mostly clear

2: sometimes clear

1: unclear

The Factors of Production Key Concepts: Societies have to

answer the two basic questions---what to produce and how to produce it. This is known as Factors of production: economic resources needed to produce goods and services.

The Four Factors of Production 1. Factor 1 Land: In economic terms land

is referring to natural resources found on or under the ground that are used to produce goods and services.

2. Factor 2 Labor: Labor in economic terms is all the human time, effort, and talent that go into the making of products. Examples: factory workers, construction workers, architects, teachers, etc…

Factors Continued 3. Factor 3 Capital: In economic terms capital means all

the resources made and used by people to produce and distribute goods and services.

Capital is known as physical or real capital. Example: warehouse, stores, roads, etc…

Workers invest in human capital – the knowledge and skills gained through experiences. Human capital involves job training or college degree.

Venture Capital: financial resources invested in businesses considered too risky for mainstream investing. Example: 1990s dot.com companies is an example of venture capitalism. Technology companies or enterprises are associated with venture capitalism. I. E. Facebook, Microsoft, Apple.

Factors Continued 4. Factor 4 Entrepreneurship: Combination

of vision, skill, ingenuity, and willingness to take risks that is required to create and run new businesses. Entrepreneurs anticipate what consumer want in the market. They are also involved in developing new product, marketing and distributing a product. Entrepreneurs are risk takers who put in their time, energy, creativity, and money in making a profit.

Applying Economic Concepts

1. Think of a product that you recently purchased. How do you think the four factor of production were used to create this product?

2. What is the main difference between land and capital as a factor of production?

3. Which of the factors of production is most important?

Identifying the Factors of Production for a New Product or Service

Task: Identify the factor of production for a new product or service.

Materials Needed: paper, pen, colored markers.

Activity: A. Think of a new product or service that

you would like to have in your lives. It can be realistic ( a computer that offers homework help) or out of the box ( a food that tastes like French fries but has the nutrition of broccoli).

• B. Identify the specific factors of production needed to manufacture this product or provide the service.

• C. Create a visual showing how the factors of production would be used.

• D. Each of you will have 3 minutes to present his or her new product or service and the visual showing factors of production needed for its creation.

Outcome In one paragraph reflect on what you

learned from the production of a new product activity.

Scoring GuideUNDERSTANDING OF CONCEPTS PRESENTATION

4. excellent

3. good

2. fair

1. poor

• 4. Clear and complete

• 3. mostly clear

• 2. sometimes clear

• 1. unclear