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Unit 2 Economic Decision Making

Unit 2 Economic Decision Making. Ms. Ramos Alta Loma High School. Why is what we want scarce?. Ms. Ramos. Our Wants Always Exceed our Resources. Even the rich have to deal w/ scarcity Resources are limited, ex: Time Money. Ms. Ramos. With resources limited, scarcity is everywhere.

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Unit 2 Economic Decision Making

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  1. Unit 2Economic Decision Making Ms. Ramos Alta Loma High School

  2. Why is what we want scarce? Ms. Ramos

  3. Our Wants Always Exceed our Resources • Even the rich have to deal w/ scarcity • Resources are limited, ex: • Time • Money Ms. Ramos

  4. With resources limited, scarcity is everywhere • Ex: land, labor, materials- are people willing to turn these over for free? • Scarcity would exist even if everyone was rich! • What if everyone wanted to build a home on the beach? Ms. Ramos

  5. Shortages are temporary, while Scarcity is forever • Most of us have experienced a shortage • Many reasons for shortages • Shortages are temporary, scarcity is forever!!! Ms. Ramos

  6. http://library.stmarytx.edu/acadlib/doc/displays/pages/0509NaturalDisasters/Nature.htmhttp://library.stmarytx.edu/acadlib/doc/displays/pages/0509NaturalDisasters/Nature.htm

  7. What’s this a picture of? Katrina. This led to what shortage? Gasoline and other southern products http://library.stmarytx.edu/acadlib/doc/displays/pages/0509NaturalDisasters/Nature.htm

  8. How do we satisfy economic wants? Ms. Ramos

  9. Look around the room….what do you see? • Share with a neighbor • All of the goods were produced to satisfy somebody’s wants Ms. Ramos

  10. Inputs, Outputs, and the Production equation • Inputs: scarce resources that go into the production process • Factors of production (FofP) are divided into 3 categories • Land, labor, capital • Outputs: G& S produced using FofP Ms. Ramos

  11. Output (G&S) Inputs Production Process Ms. Ramos

  12. Land resources the “gifts of nature” • Land is more than real estate • Air, soil, minerals, water, plants, animals • Natural resource vary in abundance • Perpetual: widely avail • Sunlight & wind • Renewable: can be replaced as used • Forest, fish • Nonrenewable: once used-gone • Oil, coal, natural gas Ms. Ramos

  13. What are “natures gifts” in a pencil? Ms. Ramos httpbattellemedia.comarchives200903search_is_a_pencil_

  14. Rapeseed Oil Nature’s gift in a pencil Pumice Rubber Zinc Copper Castor Oil (in paint) Clay Cedar Wood Wax Graphite Ms. Ramos httpbattellemedia.comarchives200903search_is_a_pencil_

  15. Labor Resources: Putting Human Capital to work • Labor: Time & effort to produce G&S for wages • Quantity depends on pop & willingness • Quality depends on skill • Human capital: knowledge & skill from educ & training -IMPORTANT!!! Ms. Ramos

  16. Strong correlation btwn a country’s level of human capital and standard of living • Japan- poor in resources, but rich in human capital- among wealthiest nations • Nigeria- rich in oil, poor in human capital- among poorest nations Ms. Ramos

  17. Gary BeckerNobel Prize winner • Estimates about 75% of the wealth of a modern economy consists of the education, training and skills of its people • - TCI: Econ Alive! The Power to Choose Ms. Ramos

  18. Capital Resources: Tools, Machines, and Buildings • Financial capital: money • Physical capital: tools, machines, buildings used in the production process Ms. Ramos

  19. Is a car capital? • No if for personal use. • Yes if used to deliver product • Ex: pizza business/restaurant buys car to deliver food • The school van is a capital good- it is used to carry out the “production of education” Ms. Ramos

  20. Putting it all together: Entrepreneurship • Combines land, labor, & capital to produce goods • Roles of Entrepreneurs • Innovator-idea • Strategist- vision & decisions • Risk Taker- invest not knowing outcome • Sparkplug- energy Ms. Ramos

  21. Working Smarter Boosts Productivity • How does one compute productivity? • Output divided by input • Can be raised two ways- efficiency • More output from input (labor produces more lumber) • Same output from fewer inputs (more lumber from tree) Ms. Ramos

  22. Productivity: Feet of lumber produced per hour Output: total board feet of lumber Input: total hours of labor Ms. Ramos

  23. Ms. Ramos

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