ECONOMICS: CLOSE TO HOME

Ms. MacLeanHistory 9

February-March 2012

What is economics? (p. 141) The word “economy” comes from a

Greek term meaning “running a household”.

Economics: the study of our efforts to satisfy our unlimited wants through the use of limited resources.

What is economics? (p. 141) Resources: available stocks or

supplies on which we can draw to meet our needs and wants.

How do we decide what we spend money on?

On which would you spend money?

What is economics? (p. 141) Scarcity: In economic terms,

something is scarce when someone will buy it for a price.

If you want to know if something is scarce, try to sell it or exchange it.

What is economics? (p. 141) What are resources we have here, in

PEI and in Canada?

Are these resources scarce?

What is economics? (p. 141) The economic system of a country

determines the way it is run. The government considers three questions:What should be produced in order to satisfy

our wants?How should we use our scarce resources to

produce it?Who should get the goods and services that

are produced?

What is economics? (p. 141) Individually, or with a partner, identify one resource in PEI (or Canada) and answer the following questions:What should be produced in order to satisfy

our wants?How should we use our scarce resources to

produce it?Who should get the goods and services that

are produced?

What is economics? (p. 142)

Suppose that the fictional land of Atlantis grows thousands of orange trees and only a few apple trees. Which fruit it more scarce (rare)?

Now, suppose the people of Atlantic never eat apples but love oranges. Which fruit would be more scarce, in economic terms?

What is economics? (p. 142)

You set up a booth in the Morell High schoolyard to sell fresh air. Will your business succeed or fail?

Is fresh air scarce or not scarce in economic terms?

What is economics? (p. 142)

An economist would say the business would fail because you are trying to sell something that is not scarce in Morell.

There are places in the world where fresh air is scarce and in these cities, this business would succeed.

What is economics? (p. 141)

Scarce items are divided into two groups:Goods: products such as sugar,

lumber, or computer chipsServices: work done for other

people, such as barbers, musicians, or architects

What is economics? (p. 141)

Can you identify which of these are goods and which are services?

○Teaching○House Cleaning○New Car○Car Salesman○Professional Hockey Player○Snowmobile Helmet

Opportunity Cost (p. 142)

When something is scarce, it has to be rationed (limited, given in fixed allowances).

Opportunity Cost (p. 143)

Imagine that Ms. MacLean is giving a HUGE test on economics on Monday. Your friend texts you on Saturday, wondering if you want to go see the new hit movie (The Hunger Games, perhaps) Saturday night. You realize that you have a hockey game Sunday afternoon so you won’t have time to study on Sunday. Do you go to the movies, or do you stay at home and study?

Opportunity Cost (p. 143)

If you chose to go to the movies instead of studying, then you have decided to accept the cost of not studying.

The cost of not studying is called the opportunity cost.

Opportunity cost: something given up in order to obtain something else

Opportunity Cost (p. 143)

If you decide to go to the movies, you have chosen to give up a good mark on the economic test, in order to obtain the chance to see the new movie.

Opportunity Cost (p. 143)

You are selling pizza at lunch for $1 a slice.

Leila has $200 in her wallet. She loves pizza and is hungry.

Joe has only $1 in his wallet. Who can best afford a piece of pizza?

Opportunity Cost (p. 143)

The opportunity cost is what each student gives up in order to buy the pizza.

Suppose Leila saved for months to go on a ski trip which costs exactly $200. If she buys the pizza then she will not be able to go skiing. The pizza will have cost her the ski trip. The opportunity cost is too high.

If Joe has no other plan for his $1, then his opportunity cost is low and he will probably buy the piece of pizza.

Opportunity Cost (p. 143)

Let’s pretend that Fred walks by and smells the pizza. He walks right over and hands you a loonie, without thinking about spending the money.

When Fred swallows the last bite, he thinks of other uses for that loonie (juice, deposit in bank account, bus fare).

Fred made a purchase without weighing the opportunity cost; this is called impulse buying.

Opportunity Cost (p. 143)

Complete p. 143 #1 a) b) c), and #3