Intro Question–

How does economics affect everyone?

Pair/Share Get with a partner and

share your ideas. You will be sharing your

partner’s ideas to the class.

How does economics affect everyone?

Something to Think About! How many people touched your shirt

before it came to be yours?

How does your money affect the world?

How can you vote with your dollar?

So how does it? Our resources are limited. But our needs and wants are unlimited. Which leads to difficult decisions about

efficiency and necessity.

Economics is about freedom. You can do what you want with your money. The markets respond to the dollars spent. But to do what you want, you have to have the

money.

What is scarcity? The constant condition in which only limited

amounts of goods and services are available to meet unlimited wants and needs.

What is there not enough of in your life? Money? Time? Love? Donuts?

What about time to create lasting friendships. The Sims

Think about it. How do you make the correct decision?

How do you know which is more important?

How does scarcity force people to make economic decisions?

Wants vs. NeedsWants Needs

Arrange the following items in their respective positions:

Flowers, Water, Car, In-N-Out, Gasoline, Coffee, Clothes

Wants and Needs Why did the items land where they did?

Did any items fall in both categories?

Are all wants and needs the same for all people?

Question:

How do all decisions in your life and in the world somehow involve trade-offs?

Share your thoughts on the question. You will be sharing your partners ideas

to the class.

Opportunity Costs Chapter 1 Section 2

Trade-Offs Guns or Butter?

Government Dilemma Spend on Military needs or domestic

needs.

Why is the government faced with these tough decisions? Scarcity.

Opportunity Costs!

The most valuable thing you are forced to give up in order to carry out a decision is your opportunity cost.

When you stay up late at night to study, what is your opportunity cost? What do you gain from studying more? What do you lose? What about the opposite scenario?

The Cost of CollegeYear Direct Costs

of CollegeOpportunity Costs (Lost Wages)

1 $20,000 $16,000

2 $20,500 $16,500

3 $21,000 $17,000

4 $21,500 $17,500

Total $83,000 $67,000

The Total Cost of CollegeCollege Costs + Opportunity Costs

=

$83,000 + $67,000 =

$150,000

Economic Mystery

"When it takes, at least, an additional seven years of schooling, and over one hundred thousand dollars in costs and lost earnings, why would a person want to graduate from college instead of dropping out after the ninth grade?"

Pillows can cost you!

How were keeping extra decorative pillows benefitting Ben Stiller?

What were the costs of keeping those pillows and preparing them daily?

Is the value of the pillows worth more than the upkeep cost?

Time can be an opportunity cost.

Marginal Analysis Taking the time to analyze how each

aspect of a decision, when changed, affects the final outcome of the decision.

Study or Sleep How each hour helps your grade improve

vs. how each hour of lost sleep affects your mood.

Marginal Analysis – Sleep or Study?Options Marginal

BenefitMarginal Cost

1st hour of extra study time

Grade of C on test

1 hour of sleep

2nd hour of extra study time

Grade of B on test

2 hours of sleep

3rd hour of extra study time

Grade of A on test

3 hours of sleep

Marginal Analysis – Food!

Combo #1 Burger and Fries - $10

Combo #2 Burger, Fries, and a Milkshake - $13

Is the milkshake worth the extra $3? This is thinking at the margin. What is the opportunity cost of that $3?

The Next Step: Business!

In order to create a successful business, an entrepreneur must be a quality marginal analyst. Use Resources Wisely Combine the factors of production to create new

products or services.

Factors of Production – All resources combined Scarcity – Not everyone can be successful Competition – Not everyone can be good enough Efficiency – May the most efficient win!

LAND, LABOR, and CAPITAL

Factors of Production - Land For economists, land is more than dirt! Land – All natural resources found on or

under the ground that are used to make products/services. Water, Forest, Fish, Iron, Coal, Plants Why wouldn’t a parking lot be considered

a land factor of production?

Factors of Production - Labor Labor is more than elbow grease! Labor – All of the human time, effort,

and talent used to product goods/services. Garbage Collectors, Mechanics, Surgeons,

Police, etc.

Factors of Production - Capital Capital is more than just money!

Capital – Resources used/made by people and kept for use in producing and distributing goods and services.

Physical vs. Human Capital Tools, machinery, factories, offices, cell phones,

roads, airports, etc = Physical Capital

Factors of Production - Capital Human Capital – A person’s knowledge or

skills used to help create goods/services. Human capital is the key to quality

entrepreneurial work.

Land or Capital – Quick Test!

Ice at Mount EverestIce in a skiing field

Sea waterSea water in a seafood restaurant

Sharks in the Atlantic OceanSharks at Sea World

Exit Question - What do you believe has the potential to

be a large economic success in the future in regards to business opportunities?

Think of the field/item/service that will be a great opportunity.