ECONOMIC CHOICES AND DECISION MAKING
Economics 1.1
What is the fundamental economic problem ALL societies must face?
People’s Unlimited Wants
Society's Limited Resources
Resources- any available means for economic or political development
Want- something we would like to have but that is not necessary for survival
Scarcity
ThanksgivingPeople’s Unlimited
WantsSociety's Limited
Resources
What We Know We Know…I think
Fundamental Economic Problem
ScarcitySociety’s limited resources
Individual’s unlimited wants
Making Choices
AHHH… What do I do?
What we know:
We live in a world with relatively scarce resources, we need to make careful economic choices about how we use these resources.
“How do we do that ?” you ask.
Three Basic Economic Questions1.What to Produce?2.How to Produce?3.For Whom to Produce?
What to Produce?
Thanksgiving’s What to Produce?
Pumpkin Soup
Salad
Roasted turkey
Cranberry salad
Gravy
Mom’s stuffing
Mashed potatoes
Baked potatoes
Sweet potatoes
Green beans
Carrots
Squash
Rolls
Pumpkin pie
Condiments
What is a society going to produce? Military vs Education Food vs Housing Exports vs Keeping what they
produce for themselves
What are we going to produce?Food
How to Produce? Thanksgiving’s
How to Produce
Some food home grown (squash, onion, potatoes, and corn from my garden)
Some food made from scratch
Some foods bought ready made (rolls)
With machinery when possible
Slave labor (Devon and Jeremy)
Now that a society knows what they will be producing, now we can ask, “How are we (society) going to produce it?”
What to produce- FoodHow are we going to produce
it? United States- through corporate
farms, large machinery and limited chemicals
N. Korea- state owned farms, lots of laborers and lots of chemicals
For Whom to Produce?
Thanksgiving “For Whom to Produce”
My family
My peeps
Anyone else who has not tasted my cooking before and agrees to come over for Thanksgiving
Now that a society knows what they want to produce and how they are going to produce it, they ask the question, “Who are we producing for?” Who is going to receive what we produce?
What to produce- Food How are we going to produce it?
United States- through corporate farms, large machinery and limited chemicals
N. Korea- state owned farms, lots of laborers and lots of chemicals
For whom to produce? United States- locally, nationwide and world
wide N. Korea- the upper echelon of society and
than export all the rest of the food (have mass domestic famine/starvation for the general population)
What We Know We Know…I think
Fundamental Economic Problem
ScarcitySociety’s limited resources
Individual’s unlimited wants
Making Choices
What to produce?How to produce?For whom to produce?
Practice Time
Cuba is a nation/state island that lies off the coast of Florida. Cuba produces mostly exports which include: cigars, sugar, nickel, tobacco, fish, citrus, and coffee. Imports include food, fuel, and clothing. The government employs most of the workers in Cuba, and the workers are poorly paid and work on labor-intense farms tending to the country’s exports. In general, the people are poor and under nourished, as there is a food shortage. The countries exports give the government officials a lot of money and they live very well.
We’ve answered the questions,
now what?
What do we know:
1.We know that we have limited resources and unlimited wants which is scarcity , and every society needs to deal with it.2.We know the three economic questions that need to be answered.3.We’ve answered those questions so we have a plan of action.4.What do you do after you complete a plan of ACTION! 5.Now we ACT!! Now we can manufacture/produce.
I’ve got NO idea
4 Factors of Production
Now let’s get producing!!
In order to produce any product, all four factors, or elements contributing to a particular result or situation, must exist.
1.Entrepreneur2.Land3.Capital4.Labor
EntrepreneurA risk-taking individual in
search of profit (individuals or government)
Starter of a business Come up with new ideas or
inventionsThey normally organize the
other factors of production
Why are they important?
What do you think?
Create the new productsCreate the new businessesCreate new jobs
As an entrepreneur I’ve got my business plan and idea, now what do I need to do?
Whose the entrepreneur in the Thanksgiving situation (who’s the boss?)
ME!
LandGift of nature
ORResources that are used in the
final product- raw material
What is the land in my Thanksgiving scenario?
TurkeyPumpkinPotatoes (shift resources to make both baked and mashed- less of each)SquashCornEggs
Now that I have my business plan, willing to take a risk (entrepreneur) and I have bought my raw material or inputs (land), what do I do next?
Start to manufacture my product.With what? I don’t have any equipment.
Capital or Capital Good
What capital or capital goods do I have in my Thanksgiving scenario?
Oven
Spoons
Pans
Refrigerator
Tools, equipment, machinery, and buildings/factories used in producing the product
Anything you use in the manufacturing of the final product
Now that I have my business plan, willing to take a risk (entrepreneur),I have bought my inputs (land) and I have the tools and equipment to produce, (capital) what do I do next?
Labor
What labor do I have in my Thanksgiving scenario?
Jeremy
Devon
The people that work or produce for you, the entrepreneur
What We Know We Know…I think
Fundamental Economic Problem
ScarcitySociety’s limited resources
Individual’s unlimited wants
Making Choices
What to produce?How to produce?For whom to produce?
Start producing!
Four Factors of Production
EntrepreneurLandCapital/capital goodsLabor
o The person that takes the risk for the chance of making a profit
o The person who answers the three fundamental questions for her/himself
o Directs the other factors of production
Raw materials and inputs/ gifts of nature
Machinery and utensils to create the productThe workers with all of their efforts and skills
Practice Time
Economics and Economist
Economics is the social science that looks at how individuals, businesses, societies and government use their limited resources to satisfy their unlimited wants
Economists are the social scientists who study and look at how individuals, businesses, societies and government use their limited resources to satisfy their unlimited wants
“How do economists do that?” you ask.
The process is very “D A E P”
DescribeAnalyzeExplainPredict
1. Describe
Central/south America
Tourist
Women sell goods
Small stands
Produce and flowers
Scope of Economics
What do you observe? Fact finding, investigate, survey…. Gather as much raw data as you can
2. Analyze
Data showed 99% of the products that were for sale were produced by small family farms or cottage industries
Cottage industry is the production, for sale, of goods at home
There was a 5% jump in tourism since last year
Take all of the notes, surveys, data, raw data…. organize them and see what the numbers tell you.
Scope of Economics
3. Explain
Publish an article in a journal
Write a book
Lecture
Go on TV, You Tube…
Use social media to get my explanation across
Take what you have learned and tell other people.
Scope of Economics
4. Predict Since 99% of
economic activity comes from cottage businesses or small family farms, the introduction of corporate farming will be disastrous for the people in this region because they will be wiped out.
Because of the additional money spent on tourism advertisement, tourism was up 5% from last year. I recommend that you increase that expenditure and hit a larger geographical area to increase the amount of tourism in this area.
Once you have your analysis done and come up with the explanation, you can use that information to predict what the future will hold.
Scope of Economics
Practice Time
What We Know We Know…I think
Fundamental Economic Problem
ScarcitySociety’s limited resources
Individual’s unlimited wants
Making Choices
What to produce?How to produce?For whom to produce?
Start producing!
Four Factors of Production
EntrepreneurLandCapital/capital goodsLabor
o The person that takes the risk for the chance of making a profit
o The person who answers the three fundamental questions for her/himself
o Directs the other factors of production
Raw materials and inputs/ gifts of nature
Machinery and utensils to create the product
The workers with all of their efforts and skills
Scope of Economics
1. Describe2. Analyze3. Explain4. Predict