Fundamentals of Economics

Fundamentals of Economics Unit 6

Unwrap the objectives Factual: Define Scarcity Conceptual: Summarize the scarcities role in economic decision making Communicative: Describe how scarcity drives economic decision making

Agenda Unwrap the objectives Video questions Lecture Notes You decide Essential question

Essential Question How does scarcity drive economic decision making?

Scarcity and how it Impacts Decision Making Part 1

Video Questions Answer the following questions from the video https://www.youtube.com/watch?v=3ez10ADR_gM&index=1&list=PL8dPuuaLjXtPNZwz5_o_5uirJ8gQXnhEO 1. According to the video what is economics? 2. According to the video what is Opportunity coast? 3. According to the video what is Scarcity? 4. According to the video what is Incentives? 5. According to the video what is Macroeconomics? 6. According to the video what is Microeconomics?

Video Questions and Answers • According to the video what is economics? • The study of People and choices 2. According to the video what is Opportunity coast? • What ever you give up to do something 3. . According to the video what is Scarcity? • The Tension Between infinite wants and finite resources 4. . According to the video what is Incentives? • A set of external motivators that explain peoples choices 5. . According to the video what is Macroeconomics? • The study of Production, Employment, Prices, and policies on a national scale 6. According to the video what is Microeconomics? • The Study of how Consumers, Workers and Firms interact to generate outcomes in specific markets

Scarcity • The state of being scarce or in short supply; shortage. • In economics, scarcity deals with the reality that most resources have a limit • There is only so much oil in the world and we will run out at some point • Scarcity also deals with how much energy or resources are need to create something • Oil is produced in nature but it takes 10s to hundreds of million years to produce

Trade Off/Opportunity Cost To have one thing or to do something there is a trade off or opportunity cost When you decide to do one thing instead of another thing, it is because you have weighed the trade off or opportunity cost When resources are limited, then we need to consider what is the best short term trade off and long term trade off for how we use resources

You decide What are three examples of a trade off or opportunity cost that you have made today? Why did you make that choice?

Incentives Something that motivates or encourages one to do something. Positive incentives reward people financially for making certain decisions and behaving in a certain way Negative incentives are punishing a person financially for making certain decisions and behaving in a certain way

Cost Benefits Comparing the cost of an action to the benefits that the action could lead to If the cost is high and the benefit is low, that action is not worth pursuing When the benefit is greater than the cost, the action is pursued

Consequences • Similar to Cost Benefits, Consequences are the good and bad results of a decision • Decisions could include taking one action over another or not taking an action at all • Positive: • Large profits, expanding into a new sector, or gaining an advantage over a competitor • Negative: • Great loss, lose out on an opportunity to expand, or allowing a competitor to get an advantage over you

You decide What type of scarcities affect the decisions that you make on a regular bases? Give three examples.

Unwrap the objectives Factual: Identify and define the four Factors of Production Conceptual: Illustrate the circular flow of goods and services Communicative: Describe the roles of the Factors of Production as part of the circular flow of goods and services

Agenda Unwrap the objectives Bubble map Lecture Notes Fill in the chart Essential question

Essential question What role does the Factors of Production play In the circular flow of goods and services?

Factors of Production Part 2

Land Land is the physical place where economic activity takes place Land also includes all the natural resources found on it. Resources can include timber, water, oil, livestock, and so forth. Land represents all the resources for production of goods

Capital • Capital is the money that companies use to buy resources, as well as the physical assets companies use when producing goods or services, such as factories and machinery. • Capital includes things like tools, vehicles, and instruments • Capital can also take the simple form of money that is invested into a company. • Money for the company to produce goods or render services • Investors are people that supply a company with capital • Money to buy supplies • Equipment to start a company

Labor • Labor represents all of the people that are available to transform resources into goods or services that can be purchased • It is important for a company to have a real labor force available • You need people with the appropriate education to convert the land and capital into the desired goods or services • It is possible for a labor force to be too educated • They will not work for little pay or will not do certain jobs

Entrepreneurship An entrepreneur is a person who combines the other factors of production - land, labor, and capital - to earn a profit These are the people that either run a company or have the idea that the company is created around.

Create a bubble map of The Factors of Production On the back of the Activity sheet Identify the Four Factors of production Give Two examples of each Factor of Production

The Circular Flow of Goods and Services Illustrates how factors move in a circular flow in the economy. It is a circular because there is no real start or finish. Each step feeds the next and the next The product changing hands changes with each step but with out that change the energy of the economy would come to a stop This will lead to less production which creates less jobs and so on.

Circular flow of Goods and Services

Create your own Chose an industry or a product and fill in the circular flow of goods chart for it. What resources are need to create? What type of workers? What type of market would sell the product or service? What type company is needed?

Unwrap The Objectives Factual: Identify the Factors of Production Conceptual: explain how productivity impacts standard of living Communicative: Evaluate the relationship between productivity and standard of living

Agenda Unwrap the objectives Lecture Notes Picture Analysis You decide Graphic Organizer Essential Question

Essential Question How strong is the relationship between productivity and standard of living and why?

Productivity, Standard of Living, and GDP Part 3

Picture Analysis What does productivity mean to you? Why do you think all of those terms are related to productivity? What terms would you add to that picture? How does productivity impact your life?

Productivity The effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input. Measures a nation’s ability to produce things and the quality of the goods and services produced There is a relationship between productivity and the quality of life. Higher productivity does not always mean higher quality of life

Factors of ProductionMan Power • Refers to the people doing the work • The workers ability to work • Education – if workers do not have access to education then there is a limit to the type of work that they can do, which limits productivity • Doctors, Teachers, • Training - some jobs need workers with specific training • Electricians, carpenters, welders

Factors of ProductionEquipment and machines • Some work requires specialized equipment to be completed • Machines and equipment make many jobs faster • When speed goes up, more things can be produced in a given amount of time • Nations that do not have access to advanced equipment cannot produce advanced goods or goods in large amounts

Factors of productionMaterials These are the resources needed to construct things or do things The quality and amount of materials that a nation has determines what they can produce and how much of it they can produce

Factors of productionTime • Some products by their nature require more time to produce than others • Crops, livestock • Others require that the people have time to produce them • If people have to spend a large amount of time traveling to work then production can decrease

Factors of productionSpace or land A nation needs land to produce crops and for livestock to graze Factories need space for equipment. When space is limited, the production goes down The space must be suitable for the work

Factor of productionPower or Energy To produce a large amount of finished products, a nation or factory must have sufficient and reliable power Energy is needed for the equipment to work and to preserve some of the refined goods When a nation has little electrical power, it will rely on man power over machines Also a nation has to be able to get power from the power plant to the factory in a reliable way

Factors of ProductionMovement of People and Materials People need to be able to get to the place where work is done Materials need to get to factories to be refined Goods need to make it to market to be purchased A nation must maintain a reliable transportation network for its workers and companies to get resources where they need to be

You decide Is competition a good thing or a bad thing? What does competition mean to you? Why is competition good or bad? How can it be good? Why would it be bad if there was no competition? How could competition be bad?

Competition Can increase production when two companies look for a better way to produce goods and get them to market When there is little or no competition, then less innovation takes place and productivity may decline or become stagnate

Technology • Technology can play many roles in productivity • Machines can allow work to be done quicker allowing more work to be done in a day or shift • Some technology is needed to do some work • Space travel • Technology can come at a cost to workers jobs when they are replaced by machines • Technology is sometimes not used when there is a lot of workers available

GDPGross Domestic Product • The total value of goods produced and services provided in a country during one year. • This number is represented by a dollar amount. • Real GDP is the same, but the number is adjusted to account for inflation or deflation • GDP Per Capita is the average income per person in a country • These figures are used to determine if the economy in a country is increasing or not • The data is not always interpreted the same by economists

Standard of living The degree of wealth and material comfort available to a person This is an indicator of the type of life that the average person can expect in a community Generally, most people are able to live a better life in a community that is able to produce the goods and services that people want or need

Graphic Organizer • Fill in the chart with examples of how productivity and standard of living are related. • When the chart is full, put an “X” through squares that indicate a negative relationship. • Ex: Jobs Lost to Machines

Unwrap The Objectives Factual: in economic terms describe equilibrium, shortage, and surplus Conceptual: explain how the laws of supply and demand affect prices Communicative: illustrate how supply and demand impact peoples decision to purchase a good or service

Agenda Unwrap objectives Lecture Notes Video questions Draw supply and demand charts Essential question

Essential Question Explain how knowing supply and demand can be used to determine what will happen in a given market?

Fundamentals of Economics