qod #2: wants & needs a lesson in scarcity & rationing ......before deciding how you will...

QOD #2: Wants & Needs A lesson in scarcity & rationing Economic Way of Thinking HW: Parent Syllabus Review

Read pp 29-34 Questions 1,2,3

AGENDA Thurs 8/20

It is Friday night. Your only chunk of free time all weekend is tonight from 6:00 to 11:00. Before deciding how you will spend this time, consider these factors:

• You have $40 to spend. • You have an AP Econ quiz Monday. • This is the first football game of the season. • It is your mother’s birthday. • Someone you like has asked you out on a date. • Your favorite band is in town tonight. Fill in a table like the one below showing how you plan to spend your time. Create your own

activities or choose from the list of possible activities. If you choose an activity from the list, use the given time and price.

Football game: 3 hours, $5 Dinner: 2 hours, $20 Movie: 2 hours, $10 Concert: 4 hours, $40 Study for test: variable time, $0 Hang out at friend’s house: variable time, $0 Work at job: variable time, earn $10 per hour Family time: variable time, $0

TIME ACTIVITY PRICE

6:00 p.m.

7:00 p.m.

8:00 p.m.

9:00 p.m.

10:00 p.m.

1. What choices did you have to make in this exercise?

2. What constraints did you face when making these decisions?

3. For each decision you made about how to spend your time, what opportunity cost did you incur?

4. Describe your purposeful behavior as it relates to the utility of your choices.

As you watch the clip from Titanic, write down examples of scarcity, rational self-interest, marginal benefits, marginal costs and opportunity costs.

With your partner, discuss the following questions and record your thoughts:

1. What are the scarce goods and how are they rationed among the passengers?

2. As the Titanic begins to sink, how does “life or death” scarcity change the way goods are rationed among passengers?

Thinking in terms of: Example of this type of thinking:

Marginal Benefit

Marginal Cost

Trade-offs

Positive economics

Normative economics

Effective decision making requires comparing the additional costs of alternatives with the additional benefits.

Most choices involve doing a little more or a little less of something: few choices are "all or nothing" decisions.

A situation in which more of one thing means less of something else. Ex. If a country spends more

on national defense than it will have less to spend on health care or education.

1.Land- natural resources

2.Labor- physical & mental talents that contribute to the production of goods & services

3.Capital- produced goods used as resources for further production..i.e. tools, computers, machinery ▪ Investment: aid in production/accumulation of capital goods

4. Entrepreneurship – special talent for taking advantage of new business opportunities

Shows the maximum amount of two

products that can be made in this time

period with current resources and

technology

● Resource Allocation

● Resource Reallocation

● Opportunity Cost

● Economic Growth

● Changes in Productivity

● Changes in Efficiency

Type of Product

Pizzas

(in hundred thousands)

Industrial Robots

(in thousands)

Production Alternatives

A B C D E

10 9 7 4 0

0 1 2 3 4

Plot the Points to Create the Graph…

Production Possibilities Model

LO5 1-11

Q Corn

M

Q Wheat O

L

Resource Allocation – a given use of land,

labour and capital

For instance, the farmer can opt to use all

resources to produce combination A:

A R

S

•OR Corn and •OS wheat

R

Q Corn

M

Q Wheat 0

L Alternatively the farmer can use all

current resources and be at point B

on PPC and produce:

•OT corn and

B T

V

•OV wheat

Q Corn

M

Q Wheat 0

L

B T

V

A

S

R

Switching factors of production

to alternative uses is called

reallocation of resources

For instance, reallocating land,

labour and capital from corn

production into wheat means

moving from A to B

How much

wheat is gained

and how much

corn is lost?

Q Maize

M

Q Wheat

L

B

A R

0 V S

T

The economic decision to move from A to B and product

more wheat involves a sacrifice –LOST CORN

Opportunity Cost – Measurement

of cost by reference to the

alternatives forgone

The opportunity cost of SV

extra wheat is RT corn

forgone

GAIN

LO

SS

Q Corn

M

Q Wheat

L

A R

0 S

The farmer is at point A

What is the opportunity cost of

producing OR corn?

At A - OS wheat is being produced

SM extra wheat could be produced

if all resources are put into wheat

The opportunity

cost of OR corn

is SM wheat

Using the data on the worksheet, create a PPC on your

own and answer the questions.

ASK FOR HELP IF NECESSARY!

● PPC Curve

Questions 10-12 Problems #1-8