Business Economics

Business Economics Spring 2010 rread@manasquanboe.org (732)-904-6379

Important Dates • Winter Break – February 6th-14th. • Chapter 1 Vocabulary Due on Wednesday 2/3. • Chapter 1 Vocabulary Quiz on Friday 2/5. • Blog Response (My webpage): Due Sunday 2/7. • CNBC Setup by Friday 2/5. • Tonight’s Assignment: Business Economics Anticipation Guide • Back To School Night: Thursday 2/18.

Important Websites • Your textbook site: • www.glencoe.com/sec/socialstudies/economics/econtoday2001.index.html • We will not be taking the textbooks home. • My Webpage: www.manasquanschools.org • Click on High School • Click on Teacher Web Pages • Click on Mine. • www.CNBC.com

My Requirements and Expectations • 1. You must be here on time and ready to go. • 2. Go there before you get here but remember #1. You cannot expect to be successful if you miss 3-4 minutes a day. • The only rules here is respect; For yourself, for your classmates, for me or any substitute, for visitors. And Responsibility, Therefore: • Absolutely no Profanity (Zero Tolerance). We all use it but it is not appropriate in professional settings and this is one of those settings. • You must get missed work if/when you are out.

End of Course Presentation Video • How can we, as business economics consultants best advise our clients to meet the challenges of increasing competition from overseas producers? • Group Production, you will serve as a team of economic consultants • You will make recommendations for your clients, an avocado producer. • What do you think you need to know about business economics, and what skills would you need to have, in order to complete a project like this?

Developing a Top Ten • Work with a person next to you and develop an answer to the previous question. Class discussion • 1. Does the work in the video fit your idea of what a business economics professional would do? If so, how? • 2. What strengths and knowledge do you have that would help in work like this? • 3. What challenges would you have to overcome to do work like this?

Homework • Read the Business Economics Anticipation Guide (Student Resource 1.1) • It is not important to figure out what an expert would put as the “right” answer, but rather to write down your own reasons. • We will review your responses tomorrow.

Goods and Services Our objectives for Today: • What is a business? • Needs and wants • Opportunity cost • The Economic Problem

What is a Business? A business is formed to provide GOODS or SERVICES Individuals have to purchase most of their goods or services as it is not possible to produce their own. Activity (a) Make a list of the goods or services you and your family use on a regular basis. (b) State the name of the provider. (c) How many of the items identified on your list are essential, because you cannot do without them? Extension How many of the items are produced in the US? Where do they come from?

Needs and Wants All humans have basic needs, these are essential if people are to survive. There are five basic needs, what are they?

Five Basic Needs Clothes Shelter Five Basic Needs Food Warmth Drink

Basic Needs Even in 2008, some people in the world can’t satisfy their basic needs. • Malnutrition • Homeless people • Elderly and people on fixed incomes

Wants The number of wants an individual can satisfy is often limited due to financial reasons. Very often when a want has been achieved an individual will then desire something else. Currently Want Live in a semi-detached house Detached house Playstation PSP Activity (a) Make a list of your current wants. (b) Justify why you want them

Related to Business To satisfy people’s desires businesses supply goods or services to meet needs and wants. Examples

Opportunity Cost Not all needs and wants can be satisfied. People on a low income may spend a higher percentage of their income on their basic needs and have little left over to purchase items to fulfil their wants.

Choices There are a limited number of resources in the world (finite) Businesses and individuals have to make choices, the wants that are not satisfied are sacrificed. Examples A new car or a vacation? New sneakers or clothes? A night out to the movies or bowling? A drink or a candy bar? Activity Write down examples opportunity cost that you have made.

Two key concepts • We have to make choices • Our choices are constrained

Example • Situation: • You are stuck in your apartment due to a snowstorm. • You can cook either cheese omelets or grilled cheese sandwiches. • Choice: how many of each to cook • Constraint: amount of ingredients on hand

Graphical Answer Omelets 3 2 1 2 4 6 Sandwiches

Graphical Answer Omelets 3 Unobtainable 2 1 2 4 6 Sandwiches

Graphical Answer Omelets 3 Attainable 2 1 2 4 6 Sandwiches

Graphical Answer Omelets 3 2 sandwiches, 2 omelets 2 1 2 4 6 Sandwiches

Time Allocation Situation: You have exactly eight hours per day to spend either studying or going on dates. Studying produces higher grades.

Time Allocation Hours of dates 8 4 0 1 2 3 4 Grades (GPA)

Time Allocation Hours of dates 8 2 4 2.25 0 1 2 3 4 Grades (GPA)

Time Allocation Hours of dates 8 2 4 0.75 0 1 2 3 4 Grades (GPA)

Time Allocation Hours of dates 8 4 0.25 2 0 1 2 3 4 Grades (GPA)

Time Allocation Hours of dates Diminishing Marginal Returns 8 4 0 1 2 3 4 Grades (GPA)

Production Coffee (1000s pounds) 15 10 5 0 500 1000 1500 Corn (1000s bushels)

Production Coffee (1000s pounds) 15 Assuming fixed amounts of resources: land, labor and capital. 10 5 0 500 1000 1500 Corn (1000s bushels)

Production Coffee (1000s pounds) Invention of automated coffee bean picker 15 10 5 0 500 1000 1500 Corn (1000s bushels)

Production Coffee (1000s pounds) Increase in amount of arable land 15 10 5 0 500 1000 1500 Corn (1000s bushels)

The production of software requires only labor, whereas the production of computers requires both labor and capital. • 1. Draw the PPC for both goods in California, with software on the vertical axis. • How would an increase in the availability of capital affect the PPC? • How would tighter immigration rules in the US affect the PPC? • How would decreased preferences for computers and increased preferences for software affect the PPC?

Assume Friday was living alone on an island. He could catch a fish for every 2 hours worked or pick 4 coconuts per hour. Friday could only work 8 hours per day. • Draw the PPC for a day for this island, with fish on the vertical axis. Explain the shape of the PPC. • What is the opportunity cost of picking one coconut? Of catching one fish? Explain. • Suppose there is “immigration” in this economy. Robinson arrives. He could catch one fish for every one hour of work, but could only pick two coconuts per hour. Since Robinson is not very used to the outdoors, he can only work 6 hrs. per day. Draw Robinson’s PPF for a day. • What is the opportunity cost of picking one coconut for Robinson? Of Catching one fish?

Households: Individuals and families. Market economy: Economic system in which supply, demand, and the price system help people make decisions and allocate resources; this is the same as free enterprise economy. Need: A need is a basic requirement for survival, such as food, clothing, and shelter. Resources: Resources are anything that households and firms need in order to achieve their needs and wants. Resources include time, money, natural resources, and technology. Standard of living: Quality of life based on ownership of necessities and luxuries that make life easier. Want: A want is simply something we would like to have but is not necessary for survival.

Macro Micro

Student Assignment The U.S. government’s debt has been increasing since 2001 and now amounts to more than $60,000 for every man, woman, and child in the United States. Create a graph that shows this increase. Like the example above, explain the numerical trend by showing the status of our national debt. Begin with 2001 and stop at 2009. Be sure to indicate what each axis represents. (Hint: In economics, the axis across the bottom is almost always the timeline.)

Business Economics