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THERE IS NO SUCH THING AS A FREE LUNCH

THERE IS NO SUCH THING AS A FREE LUNCH. Scarcity. THE FUNDAMENTAL PROBLEM FACING ALL SOCIETIES A condition that arises because society does not have enough resources to produce all things people would like to have NOT CAUSED BY SHORTAGE OF MONEY- WHY?

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THERE IS NO SUCH THING AS A FREE LUNCH

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  1. THERE IS NO SUCH THING AS A FREE LUNCH

  2. Scarcity • THE FUNDAMENTAL PROBLEM FACING ALL SOCIETIES • A condition that arises because society does not have enough resources to produce all things people would like to have • NOT CAUSED BY SHORTAGE OF MONEY- WHY? • Unlimited wants + Limited resources=SCARCITY

  3. Factors of Production • Productive resources: • LAND • CAPITAL • LABOR • ENTREPRENEURSHIPS Produce and distribute goods and services

  4. 1. LAND • “Gifts of nature” • Natural resources not created by human effort • Fixed- in limited supply (can’t be created by man)

  5. 2. CAPITAL • Tools, equipment, and factories in production of goods and services • Capital goods vs. financial capital

  6. 3. LABOR • People w/all their efforts, abilities, and skills • Availability can vary due to population, immigration, famine, war, etc.

  7. 4. ENTREPRENEURS • “Risk takers” in search of profits • Workers/innovators responsible for much change in out economy • Business owners, inventors, investors

  8. 3 Basic Questions of Every Economy • Help society decide what needs to be produced • Makes decision about how to use its resources • 1. WHAT to produce • 2. HOW to produce • 3. For WHOM to produce

  9. WHAT CHOICES HAVE YOU MADE TODAY?

  10. WHAT DID YOU GIVE UP WHEN MAKING THOSE CHOICES?

  11. Trade-Offs • Alternate choices when you cannot have everything you want. • Ex. Spend $50 the best possible way • 3 options: • 1. New Outfit • 2. iPOD speakers • 3. Full tank of gas

  12. Opportunity Cost • Not $$, but cost of the next best alternative use of time, money, or resources when one choice is made over another • *NEXT BEST ALTERNATIVE, not all the possibilities

  13. Opportunity Cost • Ex. Choice was full tank of gas over new iPOD speakers and new outfit • Time, Money, and Resources all have opportunity cost. • Examples of Time and Resources?

  14. Production Possibilities Frontier • Model used by economists to illustrate opportunity costs • Represents various combos of goods and services an economy can produce when all productive resources are fully employed • Ex. The nation of ALPHA has limited supply of resources and produces 2 kinds of goods: guns (military) and butter (consumer)

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