Understanding Economics: Scarcity & Opportunity Cost

1. Economics y10Chp 11-13 Chp 11-13 Textbook

2. What is economics about? • Do you remember the first lessons? • Economics is about l______ r_____ versus U___________ wants. Chp 11-13 Textbook

3. Managing Scarce Resources • The Problem Scarcity = Limited… versus unlimited wants Chp 11-13 Textbook

4. Explain the image below.. • http://footprint.wwf.org.uk/ Chp 11-13 Textbook

5. Economic Problem.. Chp 11-13 Textbook

6. CHOICE This leads to • What to produce? • How to produce? • For whom to produce? This is known as the Economic Problem! Extension: Read top p.43 and write down a sentence for each. Chp 11-13 Textbook

7. Economic Problem Activity • Can you illustrate ‘The Economic Problem’ by Linking key economic terms together? • Include ‘opportunity cost’. What does this important economic term mean? Chp 11-13 Textbook

8. Draw and explain in Exercise Book Chp 11-13 Textbook

9. You watched this video? • Gangnam Style overload • GUESS: • How many Youtube hits did this video get? • What could’ve been done instead of everyone watching this video? Chp 11-13 Textbook

10. We could’ve built 5 of these… Chp 11-13 Textbook

11. Answer • 2 billion hits! • = At 4:12 minutes, that equates to more than 140m hours • 16,000 years. Chp 11-13 Textbook

12. The Cost of Gangnam style What other achievements were forgone in the time spent watching a sideways shuffle and air lasso? It took 50m man-hours to complete the “supercarrier” USS Gerald Ford last year. Had people not been watching PSY—the South Korean pop star who released the song in July 2012—they could have constructed three such ships. Chp 11-13 Textbook

13. Opportunity Cost “The cost of choice in terms of losing the benefit of the next best alternative. I chose to watch Gangnam style along with 2 billion other people, in choosing this option the 2 billion people have sacrificed an alternative activity for example, building skyscrapers. Chp 11-13 Textbook

14. Examples of opportunity cost • When people make a choice they must make a sacrifice. i.e, they must chose one thing and not another. • You must decide to spend money on food or goods. • Family must decide to go on holiday or buy new car • Government must decide to build new roads or schools instead? Chp 11-13 Textbook

15. Opportunity cost • Weighing up your decisions • College Student's Opportunity Cost • Would you choose a date over revision? • Which choice has lower opportunity cost? Chp 11-13 Textbook

16. I recently bought a pair of shoes which cost me £40

17. I Could’ve bought…

18. Opportunity Cost • The TRUE Cost of something • I can’t have everything I want. • Have to make a CHOICE • In buying shoes I have sacrificed the next best alternative (CDs)

19. Opportunity Cost • THE BENEFIT FROM THE NEXT BEST ALTERNATIVE IS LOST. The shoes didn’t cost £40, the real cost was…. The opportunity cost….

20. Opportunity Cost Explain with an example how opportunity cost is central to the choices we or our family make. • E.g. I decided to have a pizza today, therefore forgoing the option of a sandwich instead. Therefore, the opportunity cost of the pizza was the sandwich I sacrificed instead. Chp 11-13 Textbook

21. Which patients to treat? • You’re a hospital manager and must make tough decisions.. Chp 11-13 Textbook

22. Opportunity Cost • The cost of c_____ in terms of losing the b______ of the next best a________. • Explain to your partner then your teacher how the Hospital Manager Task illustrates this problem. Chp 11-13 Textbook

23. Can you define / explain • Economics • Economic Problem • Scarcity • Choice • Opportunity Cost Chp 11-13 Textbook

24. PPC • Define • Production Possibility Curve • The maximum quantities of different combinations of output of two products, given current resources and technology. Chp 11-13 Textbook

25. Guns Butter Production Possibility • Choice in the National Economy I can choose to produce ALL guns or ALL butter. Or ideally, somewhere in between. Chp 11-13 Textbook

26. A production possibility curve a Units of Baseball Caps (millions) Units of BC Units of MP a8m 0.0 7m 2.2m 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of Meat Pies (millions)

27. A production possibility curve b Units of Baseball Caps (millions) Units of BC Units of MP 8m 0.0 b 7m 2.2m 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of Meat Pies (millions)

28. A production possibility curve c Units of Baseball Caps (millions) Units of BC Units of MP 8m 0.0 7m 2.2m c 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of Meat Pies (millions)

29. A production possibility curve d Units of Baseball Caps (millions) Units of BC Units of MP 8m 0.0 7m 2.2m 6m 4.0m d 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of Meat Pies (millions)

30. A production possibility curve Units of Baseball Caps (millions) Units of BC Units of MP 8m 0.0 7m 2.2m 6m 4.0m 5m 5.0m 4m 5.6m 3m 6.0m 2m 6.4m 1m 6.7m 0 7.0m Units of Meat Pies (millions)

31. 6. Production Possibility Boundary or Frontier or Curve • The production possibility curve • what the curve shows • Unobtainable production – production outside the curve

32. A production possibility curve x Units of Baseball Caps (millions) Units of Meat Pies (millions)

33. A production possibility curve w x Units of Baseball Caps (millions) Units of Meat Pies (millions)

34. 6. Production Possibility Boundary or Frontier or Curve • The production possibility curve • what the curve shows • Unobtainable production – production outside the curve • Increasing opportunity costs

35. A production possibility curve x Units of Baseball Caps (millions) Units of Meat Pies (millions)

36. A production possibility curve x 1 y Units of Baseball Caps (millions) 1 Units of Meat Pies (millions)

37. A production possibility curve x 1 y Units of Baseball Caps (millions) 1 2 z 1 Units of Meat Pies (millions)

38. 6. Production Possibility Boundary or Frontier or Curve • The production possibility curve • what the curve shows • Unobtainable production – production outside the curve • Increasing opportunity costs • Unemployed resources – production inside the curve

39. A production possibility curve Units of Baseball Caps (millions) v O Units of Meat Pies (millions)

40. Shifting out the PPF

41. Growth in potential output Units of Baseball Caps (millions) Now O Units of Meat Pies (millions)

42. Growth in potential output Units of Baseball Caps (millions) Now O Units of Meat Pies (millions)

43. Growth in potential output 5 years’ time Units of Baseball Caps (millions) Now O Units of Meat Pies (millions)

44. Shifting out the PPF

45. Outward shift of PPC • Two Reasons; • Economic Growth • Change in productive potential of an economy • Technological Change • Improvements in technology Chp 11-13 Textbook

46. What’s the difference? • Engine v Food.. Chp 11-13 Textbook

47. Capital v Consumer goods Chp 11-13 Textbook

48. Capital v Consumer Goods • Capital goods tend to be machines and other man made equipment. They can be used over and ____ again (e.g. car trips) and some can even make consumer g_______ (e.g. cooker) • Consumer goods on other hand are are n________ made or can only be used ______. They are consumed and must be re-p________. Chp 11-13 Textbook

49. Which is which Car – Capital Carrots – Consumer Fish Fishing Net Water bottle Water pump Stapler Staples Ladder Wheat Chicken shwarma BBQ Chp 11-13 Textbook

50. Capital Goods ● D ● A Shift Movement C ● ● ● B E Consumption Goods Draw and Explain Movements and Shifts Chp 11-13 Textbook